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TIME-tested
The majestic Banyan tree has been chosen to represent the core values of
DRB-HICOM Berhad (“DRB-HICOM”). Well-known for its commanding
presence and certainly resilience, the oldest Banyan in India has been
recorded to be over 200 years old. The tree is also known for its strength and
ability to reproduce aerial roots that finds its way down to strengthen its core. This
reflects DRB-HICOM’s key characteristics of consistently adding value through
diversifying its activities, branching out into new revenue sources while at the same
time strengthening its core.
Just like the Banyan tree, DRB-HICOM has withstood challenges and is time-tested.
The tree’s rich historical value bodes well with the Group’s business practice
which has persisted over 107 years. Like the strong branches of the Banyan,
DRB-HICOM is strengthened by over 80 operating companies, which employ an
estimated 60,000 talents; cultivating opportunities especially in its core business industries.
The creative concept is adapted throughout this annual report.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 1
Highlights Perspective
4 Notice of Annual General Meeting 96 Chairman’s Foreword
9 Statement Accompanying the 100 Management Discussion and Analysis (MD&A)
Notice of Annual General Meeting
110 Automotive Sector
124 Services and Education Sector
Disclosure
12
14
Vision and Mission
Corporate Profile
Key Initiatives
134 Human Capital Development
18 Calendar of Events
140 Sustainability Report
26 Financial Calendar
27 Corporate Information
28 Group Corporate Structure
Financial
CONTENT
30 Investor Relations
Statements
Performance 162 Directors’ Report
168 Statements of Comprehensive Income
Review 170 Consolidated Statement of Financial Position
36 Group 5 Years Financial Highlights 172 Company Statement of Financial Position
173 Consolidated Statement of Changes in Equity
Accountability
56 Statement on
Corporate Governance
RELATED
73 Directors’ Statement on Risk
Management and Internal Control
Information
364 Analysis of Shareholdings
79 Audit Committee Report
368 Share Performance Chart
84 Additional Compliance Information
369 Material Properties of DRB-HICOM Group
86 Statement of Directors’
Form of Proxy
Responsibility
87 Risk Management
DRB-HICOM BERHAD
2 ANNUAL REPORT 2017
highlights
DRB-HICOM BERHAD
4 ANNUAL REPORT 2017
NOTICE OF ANNUAL
NOTICE IS HEREBY GIVEN THAT the Twenty-Seventh Annual General Meeting (“27th AGM”) of DRB-HICOM Berhad (“the Company”) will be held
at Glenmarie Ballroom, Holiday Inn Kuala Lumpur Glenmarie, No. 1, Jalan Usahawan U1/8, Seksyen U1, 40250 Shah Alam, Selangor Darul
Ehsan on Wednesday, 30 August 2017 at 9.00 a.m. for the purpose of transacting the following businesses:
ORDINARY BUSINESS
1. To receive the Audited Financial Statements for the financial year ended 31 March 2017 together with the Reports of the Directors and
Auditors thereon. (Please refer to Note 1)
2. To approve the declaration of a single tier first and final dividend of 1.0 sen per share in respect of the financial year ended
31 March 2017. (Resolution 1)
3. To re-elect the following Directors who retire by rotation in accordance with Article 79 of the Company’s Constitution and who being
eligible, offered themselves for re-election:
4. To re-elect YBhg Datuk Idris bin Abdullah, who retires in accordance with Article 85 of the Company’s Constitution and who being
eligible, offered himself for re-election. (Resolution 4)
5. To approve the payment of Directors’ fees of RM744,570 to the Non-Executive Directors in respect of the financial year ended
31 March 2017. (Resolution 5)
6. To approve the payment of Directors’ fees to the Non-Executive Directors for an amount of up to RM959,000 from 1 April 2017 until
the conclusion of the next Annual General Meeting of the Company. (Resolution 6)
7. To approve the payment of benefits (excluding Directors’ fees) to the Non-Executive Directors for an amount of up to RM2,800,000
from 31 January 2017 until the conclusion of the next Annual General Meeting of the Company. (Resolution 7)
8. To re-appoint Messrs Ernst & Young as Auditors of the Company for the financial year ending 31 March 2018 and to authorise the Board
of Directors to fix their remuneration. (Resolution 8)
DRB-HICOM BERHAD
ANNUAL REPORT 2017 5
SPECIAL BUSINESS
To consider and if thought fit, to pass the following Ordinary Resolution, with or without any modifications:
“THAT subject to the passing of Resolution 3, approval be and is hereby given to YBhg Datuk Ooi Teik Huat, who will reach the nine (9)
years tenure as an Independent Non-Executive Director on 1 November 2017, to continue to act as the Senior Independent
Non-Executive Director of the Company until the conclusion of the next Annual General Meeting in accordance with the Malaysian Code
on Corporate Governance.” (Resolution 9)
10. To transact any other business of which due notice shall have been given in accordance with the Companies Act 2016 and the
Company’s Constitution.
NOTICE IS ALSO HEREBY GIVEN THAT the single tier first and final dividend of 1.0 sen per share in respect of the financial year ended
31 March 2017, if approved by the shareholders at the 27th AGM, will be paid on 3 October 2017 to the shareholders whose names appear in
the Record of Depositors of the Company at the close of business on 12 September 2017.
A depositor shall qualify for entitlement to the dividend only in respect of:
(a) shares deposited into the depositor’s securities account before 12.30 p.m. on 8 September 2017 in respect of shares which are
exempted from mandatory deposit;
(b) shares transferred into the depositor’s securities account before 4.00 p.m. on 12 September 2017 in respect of ordinary transfers; and
(c) shares bought on Bursa Malaysia Securities Berhad on a cum entitlement basis according to the Rules of Bursa Malaysia Securities
Berhad.
NOTES: approval, the re-election of the said Directors at the 27th AGM of the
Company.
1. Audited Financial Statements
In addition, the NRC had assessed and the Board had endorsed that
This agenda item is meant for discussion only as the provision of the Independent Directors who are seeking for re-election at the
Section 340(1)(a) of the Companies Act 2016 (“Act”) does not require 27th AGM of the Company comply with the independence criteria
the Audited Financial Statements to be formally approved by the prescribed in the Main Market Listing Requirements of Bursa
shareholders. Hence, this item is not put forward for voting. Malaysia Securities Berhad and that they have remained
independent in exercising their objective judgement in carrying out
2. Re-election of Directors their duties as Independent Directors.
Article 79 of the Company’s Constitution provides that at the 3. Directors’ fees and benefits
Annual General Meeting (“AGM”) of the Company, one-third (1/3) or the
number nearest to one-third (1/3) of the Directors for the time With the enforcement of the Act effective 31 January 2017,
being, shall retire from office so that all the Directors shall retire Section 230(1)(b) of the Act provides that the fees of the directors
from office once at least in every three (3) years. Article 80 provides and any benefits payable to the directors of a listed company and its
that a retiring Director shall be eligible for re-election. subsidiaries shall be approved at a general meeting. Accordingly, the
Company is seeking the shareholders’ approval at the 27th AGM on the
Article 85 of the Company’s Constitution provides that any Director following resolutions:
appointed during the year shall hold office only until the next AGM,
and shall then be eligible for re-election. (a) Resolution 5 - Payment of Directors’ fees to Non-Executive
Directors (“NEDs”) in respect of the financial year ended (“FYE”)
The Directors who are subject to re-election at the 27th AGM of the 31 March 2017 (12 months)
Company are as follows:
The total Directors’ fees of RM744,570 (12 months) is inclusive
(a) Article 79 - Retirement by rotation of the annual fees to the NEDs as members of the Board and
Board Committees as well as the pro-rated fees to the former
(i) YBhg Dato’ Ibrahim bin Taib and newly appointed NEDs of the Company for FYE 31 March
(ii) YBhg Datuk Ooi Teik Huat 2017.
(b) Article 85 – Retirement by casual vacancy The annual Directors’ fees structure for FYE 31 March 2017 has
remained unchanged as per the preceding FYE 31 March 2016
YBhg Datuk Idris bin Abdullah (Appointed on 1 January 2017)
as follows:
The proposed Directors’ fees for an estimated amount of up In determining the estimated total amount of benefits
to RM959,000 to the NEDs from 1 April 2017 until the conclusion payable to the NEDs of the Company, the Board had
of the next AGM of the Company (18 months) is based on considered various factors including the number of
the existing fees structure as shown in Item 3(a) above. scheduled meetings for the Board, Board Committees,
The Board also took into consideration the potential increase Board of subsidiary and general meetings as well as the
in the required number of Board members in compliance with number of NEDs involved in these meetings. The Board
the recommendation of the Malaysian Code on Corporate also took into consideration the potential increase in the
Governance (“MCCG”) which stipulates that for large companies, required number of Board members in compliance with
the Board should comprise a majority of independent directors. the MCCG.
(c) Resolution 7 - Payment of benefits to NEDs from 31 January The proposed Resolutions 6 and 7, if passed, will give authority to
2017 until the conclusion of the next AGM of the Company to the Company to pay the Directors’ fees and benefits on a quarterly/
be held by September 2018 pursuant to the Act (20 months) monthly basis and/or as and when incurred based on the present
Directors’ fees and benefits structure, since the NEDs have discharged
The Directors’ benefits (excluding Directors’ fees) payable to the their responsibilities and rendered their services to the Company and
NEDs by the Company and its subsidiaries for an estimated its subsidiaries throughout the period.
amount of up to RM2,800,000 for the 20 months
comprise the following: 4. Continuation in office as Independent
Non-Executive Director
the same for the shareholders’ approval at the 27th AGM of the (e) Where a member/an authorised nominee/an exempt
Company. authorised nominee appoints proxies, the proportion of
shareholdings to be represented by each proxy must be
6. Proxy specified in the instrument appointing the proxies. If the form
of proxy is returned without an indication as to how the proxy
(a) A member entitled to attend the meeting may appoint not shall vote on any particular matter, the proxy may exercise
more than two (2) proxies who may but need not be a member his/her discretion as to whether to vote on such matter and if so,
of the Company. how.
(b) Where a member of the Company is an authorised nominee, (f) A proxy appointed to attend and vote at the meeting shall have
as defined under the Securities Industry (Central Depositories) the same rights as the member to speak at the meeting. The
Act 1991, it may appoint not more than two (2) proxies in lodging of a form of proxy does not preclude a member from
respect of each securities account it holds to which ordinary attending and voting in person at the meeting should the
shares in the Company are credited. member subsequently decide to do so.
(c) For an exempt authorised nominee which holds ordinary (g) The instrument appointing a proxy together with the power
shares in the Company for multiple beneficial owners in one (1) of attorney or other authority, if any, under which it is signed or
securities account (omnibus account), there is no limit to the a certified copy thereof, shall be deposited at the office of the
number of proxies which the exempt authorised nominee may Share Registrar, Symphony Share Registrars Sdn. Bhd., Level 6,
appoint in respect of each omnibus account it holds. Symphony House, Pusat Dagangan Dana 1, Jalan PJU 1A/46,
47301 Petaling Jaya, Selangor Darul Ehsan (Tel: 03-7849 0777)
(d) The instrument appointing a proxy shall be in writing under the not less than forty-eight (48) hours before the time set for
hand of the appointor or his attorney duly authorised in writing holding this meeting or adjourned meeting, or in the case of a
or, if the appointor is a corporation, either under its common poll, not less than twenty-four (24) hours before the time
seal or under the hand of an officer or attorney duly authorised appointed for the taking of a poll, and in default the instrument
in writing. of proxy shall not be treated as valid.
For the purpose of determining a member who shall be entitled to attend the 27th AGM, the Company shall be requesting Bursa Malaysia
Depository Sdn. Bhd. to issue a General Meeting Record of Depositors as at 23 August 2017. Only a depositor whose name appears therein
shall be entitled to attend the 27th AGM or appoint a proxy(ies) to attend and vote on such depositor’s behalf.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 9
(Pursuant to Paragraph 8.27(2) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad)
No notice in writing has been received by the Company nominating any candidate for election as Director at the 27th AGM of the Company.
The Directors who are due for retirement and seeking for re-election pursuant to the Company’s Constitution are as set out in the Notice of
27th AGM.
DRB-HICOM BERHAD
10 ANNUAL REPORT 2017
disclosure
CORPORATE
DRB-HICOM BERHAD
12 ANNUAL REPORT 2017
CORPORATE
profile
A Brief History major achievements was the development of the National Car
Project via Perusahaan Otomobil Nasional Sdn. Bhd. (“PROTON”).
Other strategic projects included manufacturing of non-national
HICOM Holdings Berhad (“HHB”) traces its beginnings back to 1910
motorcycles, general purpose engines, foundry works and
when it was initially incorporated as an investment holding company;
machining, diecasting, industrial estates including golf resort
The New Serendah Rubber Company Limited (“TNSRC”), involved
development and even cement production.
primarily in cultivating rubber and palm oil in four estates:
Serendah and Connemara estates in Selangor, Bukit Keledek estate
In 1991, its name was changed to HICOM Berhad. At that time, it
in Negeri Sembilan and Asahi estate in Johor. In December 1993, the
was 95.8% owned by the Malaysian Government with the remaining
company changed its name to HICOM Holdings Berhad (“HHB”) and
shares held by HICOM’s employees via the Employees’ Share Option
acquired the entire issued and paid-up share capital of HICOM Berhad
Scheme.
(from the Ministry of Finance) and its employees via a corporate
restructuring exercise.
Diversified Resources Berhad (“DRB”) was initially incorporated on
28 August 1990 as a private limited company under the name of
HICOM Berhad (“HICOM”) itself was incorporated on 27 November
Peerless Assets Sdn. Bhd. On 3 August 1991, it changed its name to
1980 under the name of The Heavy Industries Corporation of
Peerless Assets Berhad upon its conversion into a public company,
Malaysia Berhad – and it was established as an investment holding
and then again DRB on 19 September 1991. In September 1992,
company principally engaged in the identification, initiation, planning,
DRB acquired Imatex Berhad and Automotive Corporation
implementation and management of projects in the field of heavy
(Malaysia) Sdn. Bhd. via a share exchange exercise. On
industries. Since its inception, HICOM has been instrumental in
4 September 1992, DRB was listed on the main board of KLSE.
leading the nation’s drive towards industrialisation. Among its
DRB-HICOM BERHAD
ANNUAL REPORT 2017 15
DRB-HICOM Today
The Group owns the national car brand, PROTON, which has
undergone a turnaround resulting in the recent entry of Zhejiang
Geely Holding Group Co., Ltd. (“Geely Holding”), a leading global
automotive manufacturer based in China, as its strategic foreign
partner. A Definitive Agreement was signed on 23 June 2017 for
Geely Holding to take 49.9% equity in PROTON Holdings Berhad.
Supporting its own assembly and manufacturing lines as well In November 2013, DRB-HICOM acquired Composites Technology
as those of other local and international car manufacturers are Research Malaysia Sdn. Bhd. (“CTRM”) from the Ministry of
12 Tier one vendors that produce original equipment Finance Incorporated, which marked DRB-HICOM’s entry into
manufacturer (“OEM”) parts. Together, these vendors ensure the the aerospace manufacturing industry. The company has
Group’s ability to cater to any complex precision-engineering needs. established itself as a centre of excellence for composite
aerostructures, supplying top global aerospace companies and
DRB-HICOM has 13 companies under its banner that aircraft manufacturers including Airbus and Boeing. CTRM is the
assemble/manufacture and distribute various local and only company in Asia with 12 autoclaves housed under a single
foreign-manufactured motorcycles, cars and speciality vehicles, plant, located in Batu Berendam, Melaka. Together with six other
and provide after-sales service, as well as offering logistics and subsidiaries, CTRM’s expertise spans the commercial and military
leasing services. Among the marques that are assembled and aerospace-and-non-aerospace, general aviation and defence
subsequently distributed are Honda, Mitsubishi and Isuzu. The Group industries.
is also an authorised dealer for, among others, Audi, Volkswagen,
Mitsubishi and Isuzu; and has exclusive distributorship rights DRB-HICOM’s logistics business comprises Pos Malaysia Berhad
in Malaysia for Tata vehicles and Jeep suburban utility (“Pos Malaysia”) Group which, apart from Pos Malaysia, includes
vehicles (“SUVs”). Pos Aviation Sdn. Bhd. (formerly known as KL Airport
Services Sdn. Bhd.), Pos Logistics Berhad (formerly known as
The Group has made a name for itself in the defence sector Konsortium Logistik Berhad) and Pos Asia Cargo Express Sdn.
through DRB-HICOM Defence Technologies Sdn. Bhd. (“DEFTECH”), Bhd. (formerly known as DRB-HICOM Asia Cargo Express Sdn.
which has set the bar in designing, developing, manufacturing Bhd.); as well as DRB-HICOM Auto Solutions Sdn. Bhd. (“DHAS”).
and supplying armoured and logistics vehicles for domestic and Through these two groups of companies, the Group boasts a
foreign military and homeland security use, in addition to providing total of 1.78 million square feet of warehousing capacity and two
customised vehicles for hospitals, and other commercial Boeing 737-400 freighters for cargo transport. The Group’s
transportation vehicles. consolidation of its logistics operations under Pos Malaysia
DRB-HICOM BERHAD
ANNUAL REPORT 2017 17
CALENDAR OF
events
2016 – 2017
APRIL 2016
18 – 21 23
DEFENCE SERVICES ASIA (“DSA”) 2016 MAJLIS ANUGERAH KECEMERLANGAN PT3, SPM & STPM
DRB-HICOM Defence Technologies Sdn. Bhd. (“DEFTECH”) 2015
participated in the DSA 2016 which provided an opportunity For the 8th year, an event was held to recognise children of Warga
to showcase its range of products and services. At the event, DRB-HICOM who had excelled in the 2015 national examinations.
YAB Dato’ Sri Mohd Najib bin Tun Haji Abdul Razak, Prime Every year, the number of recipients has increased and during
Minister of Malaysia officiated the naming of the 4x4 High the ceremony, a total of 286 well-deserving students with
Mobility Armoured Vehicle, LIPANBARA. In another separate a minimum of 7 A’s for PT3, 7 A’s for SPM and 3 A’s for STPM
function, DEFTECH also signed four agreements valued at received the award.
more than RM191 million which was witnessed by YB Datuk
Seri Hishammuddin Tun Hussein, the Minister of Defence.
MAY 2016
21
24
LAUNCH OF VOLKSWAGEN SEMENYIH
HICOM Auto Sdn. Bhd. marked another milestone with the SIGNING OF MEMORANDUM OF UNDERSTANDING (“MOU”)
launch of its very own 3S centre in Semenyih. With a built-up WITH KEMENTERIAN BELIA DAN SUKAN (“KBS”)
area of 34,030 square feet covering two floors, the 3S centre Two of DRB-HICOM subsidiaries, KL Airport Services Sdn. Bhd.
features a showroom that is able to fit eight Volkswagen cars, and Composites Technology Research Malaysia Sdn. Bhd. signed
and a customer lounge. The well-equipped service centre has a an MoU with KBS to provide industrial training placement for
total of 11 service bays. The launch was officiated by YBhg Dato’ Institut Kemahiran Belia Negara (“IKBN”) students. The ceremony
Abdul Harith Abdullah, Chief Operating Officer, Automotive was graced by YB Khairy Jamaluddin, Minister of Youth and
Distribution and Manufacturing & Engineering, DRB-HICOM Sports.
Berhad and Mr Armin Keller, Managing Director of Volkswagen
Group Malaysia.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 19
JUNE 2016
14 18 –19
PROTON UNVEILS THE NEW PERDANA RAYA AUTOFEST
The unveiling marks PROTON’s re-entry into the D-segment The DRB-HICOM Autofest returned with a festivities twist; with
market with the 2.0 and 2.4 variants, featuring a sophisticated the Raya Autofest edition. Exclusive deals were offered on brand
yet sporty executive sedan. The new Perdana was unveiled by new and pre-loved cars. More than 5,000 visitors joined in the
YAB Dato’ Sri Mohd Najib bin Tun Hj Abdul Razak, Prime Minister fun and exciting programmes. Participating brands included,
of Malaysia, accompanied by YBhg Dato’ Sri Syed Faisal Albar, PROTON, Lotus, Jeep, Audi, Honda, Volkswagen, Mitsubishi,
Chairman of PROTON and YBhg Dato’ Ahmad Fuaad Kenali, Chief Tata, Isuzu and MODENAS.
Executive Officer of PROTON.
16 25
BUBUR LAMBUK FOR THE COMMUNITY IFTAR WARGA DRB-HICOM
Sahabat DRB-HICOM ushered in the holy month of Ramadhan, DRB-HICOM held its annual Iftar at Holiday Inn Kuala Lumpur
cooking 10 large pots of Bubur Lambuk. The volunteers worked Glenmarie, gathering more than 1,000 Warga DRB-HICOM and
together to complete the dish by the afternoon and packed it their family members. The attendees enjoyed the feast served
for distribution to more than 3,000 Warga DRB-HICOM and and were all smiles during the much awaited Duit Raya handover
neighbouring communities in Glenmarie and Shah Alam. ceremony for the children.
DRB-HICOM BERHAD
20 ANNUAL REPORT 2017
20 6
AIDILFITRI WITH WARGA AL-FIKRAH MANGROVE RESTORATION PROGRAMME
Festivities are about sharing the merriment and Aidilfitri was A total of 39 Sahabat DRB-HICOM volunteers went back to
made more meaningful when Sahabat DRB-HICOM spent their nature at the Mangrove Restoration Programme held at
day with the golden citizens of Pusat Jagaan Al-Fikrah in Kajang. Kuala Selangor National Park. The programme was organised
The residents were fed and entertained by the volunteers. At the to raise awareness on environmental issues and instil a love for
event, DRB-HICOM also handed a contribution to cover the daily nature among our Warga. It also signifies our small step towards
operations of the home. minimising our carbon footprint and provides an avenue for
our Warga DRB-HICOM to learn more about Malaysia’s coastal
environment and its flora and fauna. Over 350 saplings were
planted along the coastline of Kuala Selangor National Park
which is managed by the Malaysian Nature Society.
26
PATIENT BEDS FOR HAJ PILGRIMAGE
As a participant of the Sahabat Tabung Haji corporate
volunteerism programme, DRB-HICOM contributed 25 patient
17
beds for usage during the Haj Pilgrimage 1437H. The contribution DRB-HICOM UNIVERSITY INKS AN MOU WITH UNIVERSITY OF
was handed over to YAB Dato’ Sri Mohd Najib bin Tun Haji Abdul MASSACHUSETTS DARMOUTH
Razak, Prime Minister of Malaysia. The signing of an MoU between both parties allows cooperation
and opportunities on Academic Programme for Student
Exchange and Research Programmes. The signing was witnessed
by YBhg Brig. Gen. (K) Tan Sri Dato’ Sri (Dr) Haji Mohd Khamil bin
Jamil, Chairman of DRB-HICOM Berhad.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 21
23 28
PROTON UNVEILS THE SECOND GENERATION PERSONA PROTON UNVEILS ITS THIRD GENERATION SAGA
The unveiling was graced by YB Dato’ Sri Mustapa Mohamed, First introduced in 1985, the people’s car, Proton Saga has
Minister of International Trade and Industry. The first Persona evolved into a modern, contemporary and exciting new look in
was introduced in 2007, the all-new 2nd Generation Persona 2016. The event was graced by YB Khairy Jamaluddin, Minister of
is powered by a more efficient 1.6L VVT engine and is the first Youth and Sports.
PROTON car that is supported by ECO Drive Assist.
SEPTEMBER 2016
29
DRB-HICOM 26TH ANNUAL GENERAL MEETING &
EXTRAORDINARY GENERAL MEETING
14 The 26th Annual General Meeting and Extraordinary General
Meeting was held at the Holiday Inn Kuala Lumpur Glenmarie.
DRB-HICOM AND PROTON PRESENTS CARS TO MALAYSIAN
The meeting was attended by a total of 1,700 shareholders.
OLYMPIC MEDALLISTS OF RIO 2016
In appreciation of the achievements recorded by the Malaysian
Olympic team, DRB-HICOM and PROTON presented eight cars
to the nation’s heroes who won Olympic medals for the country.
The event was graced by YB Khairy Jamaluddin, accompanied
by Chef-de-Mission of the Malaysian Olympic Contingent,
YBhg Tan Sri Mohamed Al-Amin Abdul Majid.
DRB-HICOM BERHAD
22 ANNUAL REPORT 2017
OCTOBER 2016
17 24
DRB-HICOM PRESENTS UMRAH PACKAGES TO MALAYSIAN PROTON WRAPS UP 2016 WITH LAUNCH OF ERTIGA
PARALYMPIC MEDALLISTS OF RIO 2016 Proton Ertiga is the fourth and final model launched by PROTON
DRB-HICOM presented Umrah Packages for the medallists for the year and was launched by YBhg Brig. Gen. (K) Tan Sri Dato’
and their parents. Gold medallists Mohamad Ridzuan Mohd Puzi, Sri (Dr) Haji Mohd Khamil bin Jamil, Chairman of DRB-HICOM
Muhammad Ziyad Zolkefli and Abdul Latif Romly; and bronze Berhad. Ertiga is the first model introduced though PROTON’s
medallist Siti Noor Radiah Ismail were present to receive their collaboration with Suzuki Motor Corporation Japan.
rewards.
NOVEMBER 2016
7 25
DEEPAVALI CELEBRATION AT SJKT LADANG GLENMARIE MODENAS LAUNCHES THREE NEW MODELS
Once again, the merriment of festivities were shared and this MODENAS marked a significant milestone with the introduction
time with 70 students of SJKT Ladang Glenmarie. The students of the all-new Modenas Karisma and Elegan 250 scooters and
were entertained by our Sahabat DRB-HICOM volunteers and KYMCO Downtown 250i. The Karisma and Elegan were fruits
enjoyed balloon sculpting, face painting and many more activities of the partnership between Modenas and KYMCO. They were
that were organised. An array of vegetarian buffet spread was launched by YBhg Brig. Gen. (K) Tan Sri Dato’ Sri (Dr) Haji Mohd
catered for the event. Khamil bin Jamil, Chairman of DRB-HICOM Berhad.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 23
DECEMBER 2016
6 23
BACK-TO-SCHOOL PROGRAMME HANDING OVER OF VEHICLES TO PUSAT JAGAAN AL-FIKRAH
DRB-HICOM provided some financial aid to 169 children of PROTON handed over an Exora while DRB-HICOM Commercial
Warga DRB-HICOM whose parents’ earned less than RM3,000 a Vehicle (“DHCV”) handed over a Tata Xenon to Pusat Jagaan
month. In addition, DRB-HICOM also provided 90 students from Al-Fikrah in Kajang. YBhg Dato’ Mohd Radzaif Mohamed, Deputy
the neighbouring SJKT Glenmarie with financial aid for the 2017 Chief Executive Officer of PROTON and Encik Shamsuddin
school year. Hj Ishak, Head Sales Operations of DHCV handed the vehicles to
Tuan Haji Azmi Mohd Zain, Chairman of Pusat Jagaan Al-Fikrah.
JANUARY 2017
21 14 – 15
BANK MUAMALAT INKS MOA WITH DRB-HICOM UNIVERSITY DRB-HICOM AUTOFEST
The signing of the Memorandum of Agreement between both The new year was celebrated with the 6th edition of DRB-HICOM
parties is to jointly develop an Executive Leadership Programme Autofest. Discounts of up to RM150,000 for new vehicles were
(“ELP”) for Warga Bank Muamalat. The ELP combines DRB-HICOM offered, and visitors stood a chance to win a car in the lucky draw.
University’s postgraduate studies with leadership training to
produce well-rounded executives, ready to assume leadership
positions within Bank Muamalat.
DRB-HICOM BERHAD
24 ANNUAL REPORT 2017
6 15
CHINESE NEW YEAR CELEBRATION WITH CHILDREN OF PUSAT PRESENTATION OF CERTIFICATES TO DRB-HICOM EMERGENCY
PENJAGAAN KANAK-KANAK TERENCAT AKAL MELAKA ASSISTANCE TEAM (“DHEAT”)
Celebration of the lunar year was made more meaningful when DRB-HICOM launched its very own DHEAT team and handed over
our Sahabat DRB-HICOM volunteers visited the home and spent certificates to the 19 deserving members of the DHEAT team
some time entertaining the children. A total of 52 special children, certified by Jabatan Bomba dan Penyelamat Shah Alam. At the
some as young as nine years old were given attention by Sahabat event, DHEAT team demonstrated a few rappelling techniques.
volunteers. In addition, DRB-HICOM contributed some financial YBhg Tuan Azmel Kamaruddin, Ketua Balai, Balai Bomba dan
aid for the centre. Mr R Farimanalan @ David, Chairman of the Penyelamat Shah Alam attended the event.
home received the cheque from Encik Shamsuddin Mohamed
Yusof, Group Chief Operating Officer, Composites Technology
Research Malaysia Sdn. Bhd. (“CTRM”).
17 25
POS MALAYSIA LAUNCHES DIGICERT NEW HEAD OFFICE AND DRB-HICOM UNIVERSITY OF AUTOMOTIVE MALAYSIA
POS LAJU CYBERJAYA 4TH CONVOCATION
The new Pos Laju Cyberjaya outlet and Digicert Head Office were The convocation was graced by Ke Bawah Duli Yang Maha Mulia
officiated by YB Dato’ Jailani Johari, Deputy Minister, Ministry of Pemangku Raja Pahang, Tengku Mahkota Abdullah Al-Haj Ibni Sultan
Communication and Multimedia. Haji Ahmad Shah Al-Musta’in Billah. At the ceremony, a total of 440
scrolls were presented to graduates of DRB-HICOM University.
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DRB-HICOM BERHAD
26 ANNUAL REPORT 2017
FINANCIAL
calendar
for the financial year ended 31 March 2017
Announcement of Unaudited
Consolidated Results
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
ended ended ended ended
30 June 2016 30 September 2016 31 December 2016 31 March 2017
Dividend
First and Final
Single tier dividend of 1.0 sen per share
Notice Entitlement Payment
Date
312017 Date
12 Date
03 2017
JULY SEPTEMBER OCTOBER
2017
312017 30 2017
Annual General Date JULY Date AUGUST
Meeting
DRB-HICOM BERHAD
ANNUAL REPORT 2017 27
DRB-HICOM BERHAD
ANNUAL REPORT 2017 x
CORPORATE
as at 30 June 2017
as at 30 June 2017
Brigadier General (K) Tan Sri Dato’ Sri Datuk Ooi Teik Huat Dato’ Ibrahim bin Taib
(Dr) Haji Mohd Khamil bin Jamil Senior Independent Non-Executive Director Independent Non-Executive Director
Chairman
Non-Independent Non-Executive Director Dato’ Siti Fatimah binti Daud Datuk Idris bin Abdullah
Non-Independent Non-Executive Director Independent Non-Executive Director
Dato’ Sri Syed Faisal Albar bin
Syed A.R. Albar
Group Managing Director
Level 5, Wisma DRB-HICOM Symphony Share Registrars Sdn. Bhd. Naqiz & Partners
No. 2, Jalan Usahawan U1/8 (Company No: 378993-D) Hisham, Sobri & Kadir
Seksyen U1, 40150 Shah Alam Kadir Andri & Partners
Selangor Darul Ehsan, Malaysia Level 6, Symphony House
Pusat Dagangan Dana 1 Stock Exchange Listing
Tel : (03) 2052 8000 Jalan PJU 1A/46, 47301 Petaling Jaya
Fax : (03) 2052 8099 Selangor Darul Ehsan, Malaysia Listed on Main Market of
Bursa Malaysia Securities Berhad
Company Website Tel : (03) 7849 0777 Listing Date : 4 September 1992
Fax : (03) 7841 8151/52 Stock Name : DRBHCOM
www.drb-hicom.com E-mail : ssr.helpdesk@symphony.com.my Stock Code : 1619
Abdul Jamil bin Johari Ernst & Young (AF 0039) Tel : (03) 2052 8936/7695
Head, Group Internal Audit Chartered Accountants
Level 23A, Menara Milenium
Tel : (03) 2052 8962 Jalan Damanlela
Fax : (03) 2052 8959 Pusat Bandar Damansara
E-mail : jamil@drb-hicom.com 50490 Kuala Lumpur, Malaysia
GROUP CORPORATE
structure
(operating companies) as at 31 March 2017
Pos Malaysia HICOM University Bank Muamalat PUSPAKOM Motosikal Dan Enjin HICOM Holdings DRB-HICOM Auto DRB-HICOM Defence Honda Malaysia Isuzu Malaysia
Berhad College Sdn. Bhd. Malaysia Berhad Sdn. Bhd. Nasional Sdn. Bhd. Berhad Solutions Sdn. Bhd. Technologies Sdn. Bhd. Sdn. Bhd.
Sdn. Bhd.
E.I. : 53.50% E.I. : 100% E.I. : 70% E.I. : 100% E.I. : 81% E.I. : 100% E.I. : 100% E.I. : 34% E.I. : 48.42%
E.I. : 100%
E.I. : 96.87%
PSH Express Pos Aviation Pos Ar-Rahnu Suzuki Motorcycle ISUZU HICOM HICOM-YAMAHA CTRM Testing Unmanned Systems CTRM Aero CTRM Systems CTRM Aviation
Sdn. Bhd. Sdn. Bhd. Sdn. Bhd. Malaysia Sdn. Bhd. Malaysia Sdn. Bhd. Manufacturing Laboratory Technology Composites Integration Sdn. Bhd.
Malaysia Sdn. Bhd. Sdn. Bhd. Sdn. Bhd. Sdn. Bhd. Sdn. Bhd.
E.I. : 53.50% E.I. : 53.50% E.I. : 53.50% E.I. : 29% E.I. : 49% E.I. : 96.87%
E.I. : 45% E.I. : 96.87% E.I. : 96.87% E.I. : 96.87% E.I. : 96.87%
Pos Asia Cargo Pos Aviation Pos Logistics Alam Flora HICOM Automotive Edaran Otomobil DRB-HICOM HICOM Polymers HICOM Automotive HICOM-Teck See
Express Sdn. Bhd. Engineering Berhad Sdn. Bhd. Manufacturers Nasional Berhad Commercial Vehicles Industry Diecastings Corporation Manufacturing
Services Sdn. Bhd. (Malaysia) Sdn. Bhd. Sdn. Bhd. Sdn. Bhd. Sdn. Bhd. (Malaysia) Sdn. Bhd. Malaysia Sdn. Bhd.
E.I. : 53.50% E.I. : 53.50% E.I. : 97.37% E.I. : 100%
E.I. : 53.50% E.I. : 100% E.I. : 100% E.I. : 100% E.I. : 100% E.I. : 100% E.I. : 51%
Diperdana Kontena KP Asia Cougar Logistics Westport Distripark DRB-HICOM HICOM Auto Euromobil DRB-HICOM EZ-Drive HICOM HBPO Isuzu Service Center
Sdn. Bhd. Auto Logistics (Malaysia) Sdn. Bhd. (M) Sdn. Bhd. Environmental Sdn. Bhd. Sdn. Bhd. Sdn. Bhd. Sdn. Bhd. Sdn. Bhd.
Sdn. Bhd. Services Sdn. Bhd.
E.I. : 53.50% E.I. : 53.50% E.I. : 53.50% E.I. : 100% E.I. : 100% E.I. : 100% E.I. : 60% E.I. : 73.69%
E.I. : 53.50% E.I. : 97.37%
Malaysian Shipping Aman Freight PNSL Berhad KP Distribution SRT-EON Security Mitsubishi Motors EON Auto Mart DRB-HICOM Leasing
Agencies Sdn. Bhd. (Malaysia) Sdn. Bhd. Services Sdn. Bhd. Services Sdn. Bhd. Malaysia Sdn. Bhd. Sdn. Bhd.
E.I. : 53.50% Sdn. Bhd.
E.I. : 53.50% E.I. : 53.50% E.I. : 53.50% E.I. : 40% E.I. : 100% E.I. : 100%
E.I. : 48%
Sectorial
Automotive
Services
Investment Holding
Joint Ventures
Note :
E.I. DRB-HICOM Group’s Effective Interest
Media City Proton Exedy (Malaysia) Marutech Elastomer Proton Marketing Perusahan Otomobil Proton Lotus Advance
Development Properties Sdn. Bhd. Industries Sdn. Bhd. Sdn. Bhd. Nasional Sdn. Bhd. Tanjung Malim Technologies
Sdn. Bhd. Sdn. Bhd. Sdn. Bhd. Sdn. Bhd.
E.I. : 45% E.I. : 25% E.I. : 100% E.I. : 100%
E.I. : 51% E.I. : 100% E.I. : 100% E.I. : 100%
Proton Cars Proton Parts Centre Proton Edar Proton Motors Miyazu Lotus Group Symphony
Australia Sdn. Bhd. Sdn. Bhd. (Thailand) (Malaysia) International Lotus Limited
Pty. Limited Company Limited Sdn. Bhd. Limited
E.I. : 100% E.I. : 100% E.I. : 100%
E.I. : 100% E.I. : 100% E.I. : 66% E.I. : 100%
PHN Industry Proton City HICOM Berhad Glenmarie EON Properties Proton Commerce Lotus Cars Malaysia Group Lotus Beijing Lotus
Sdn. Bhd. Development Development Sdn. Bhd. Sdn. Bhd. Sdn. Bhd. Plc Cars Sales
Corporation E.I. : 100% (Pahang) Sdn. Bhd. Co., Ltd.
E.I. : 100% Sdn. Bhd. E.I. : 100% E.I. : 50% E.I. : 100% E.I. : 100%
E.I. : 100% E.I. : 100%
E.I. : 100%
Oriental Summit DRB-HICOM Dekad Kaliber Glenmarie Glenmarie Cove PT Proton Edar Automotive Lotus Lotus Lightweight Lotus Cars
Industries Sdn. Bhd. Mechatronics Sdn. Bhd. Properties Development Indonesia Conversion Holdings Inc. Structures Limited Limited
Sdn. Bhd. Sdn. Bhd. Sdn. Bhd. Engineering
E.I. : 100% E.I. : 100% E.I. : 100% Sdn. Bhd. E.I. : 100% E.I. : 100% E.I. : 100%
E.I. : 100% E.I. : 100% E.I. : 100%
E.I. : 100%
Faurecia HICOM HICOM Indungan Puncak Permai Benua Kurnia Neraca Prisma Lotus Engineering Lotus Cars USA Inc. Lotus Engineering
Emissions Control Sdn. Bhd. Sdn. Bhd. Sdn. Bhd. Sdn. Bhd. Inc. Limited
Technologies (M) E.I. : 100%
Sdn. Bhd. E.I. : 100% E.I. : 58% E.I. : 100% E.I. : 100% E.I. : 100% E.I. : 100%
E.I. : 35%
HICOM-Gamuda
Development
Sdn. Bhd.
E.I. : 35.30%
DRB-HICOM BERHAD
30 ANNUAL REPORT 2017
INVESTOR
relations
FY2016/17 had been a challenging year for the DRB-HICOM Group. Global policies and political
uncertainties, downward commodity prices, unprecedented hike in the exchange rate and
weakened domestic consumer spending amid subdued economic growth had undeniably
impacted our businesses. Despite these challenges, the Group continued to expand and
enhance our portfolio, especially in the sphere of logistics and aviation operations. As part of
our commitment to strengthen our relationship with the investment community, through our
Investor Relations (“IR”) Department championed by Senior Management, the Group continued
to enhance our engagements to keep the investment community informed on our business
developments, challenges and strategies going forward.
SHAREHOLDER BASE
SHARE PERFORMANCE
For FY2016/17, DRB-HICOM share price traded in line with FBM KLCI performance on the back of feeble economic condition. The share price
was closed at RM1.40 on 31 March 2017 with total turnover of RM1,542.8 million and 1,855.8 million shares exchanged hands in FY2016/17
compared to a total turnover of RM619.0 million with 474.3 million shares traded in FY2015/16. The surge in volume traded was mainly
derived from the escalating interest in the Group’s businesses despite the challenging economic outlook.
1.4
1750
1.2
1700
1
0.8 1650
0.6
1600
0.4
1550
0.2 DRB-HICOM
FBM KLCI
0 1500
Apr 16 May 16 Jun 16 Jul 16 Aug 16 Sep 16 Oct 16 Nov 16 Dec 16 Jan 17 Feb 17 Mar 17
3
2,000
2.5
1,500
2
1.5
1,000
1
500
0.5
0 0
FY2012/13 FY2013/14 FY2014/15 FY2015/16 FY2016/17
Volume Traded (millions) Share Price (RM) Highest Share Price (RM) Lowest
INVESTORS ENGAGEMENT
Various methods were adopted in IR’s efforts to ensure continuity in engaging the investment community which included:
Plant Visits
We conducted a couple of visits to the PROTON Centre of Excellence
in Shah Alam for bondholders which included corporate briefings,
tours to the Medium Volume Factory (“MVF”) plant, the Virtual Reality
studio, the passive safety testing lab and we concluded the visits
with PROTON and Lotus cars test drives at the tracks, enabling them
to experience the new and improved quality of PROTON cars. The
Webpage
In line with the Group’s diligent efforts to make available
Capital Market Feedback
up-to-date information on our business and performance to
DRB-HICOM recognises that feedback from the investment
all market participants, our latest quarterly financial results,
community is vital to meeting the information needs and improving
announcements and disclosure are posted on our corporate
relationships. As such, any constructive feedback and ideas can be
website at www.drb-hicom.com as per Bursa Malaysia
directed to the IR Department at invest@drb-hicom.com.
requirements. Our website also contains annual reports, press
releases and historical corporate and financial information for easy
accessibility.
DRB-HICOM BERHAD
34 ANNUAL REPORT 2017
PERFORMANCE
review
DRB-HICOM BERHAD
36 ANNUAL REPORT 2017
GROUP 5 YEARS
financial highlights
Strong management
lays the groundwork
for great success
DRB-HICOM BERHAD
ANNUAL REPORT 2017 39
leadership
DRB-HICOM BERHAD
40 ANNUAL REPORT 2017
PROFILE OF
directors
BRIGADIER GENERAL (K) Brig. Gen. (K) Tan Sri Dato’ Sri (Dr)
Haji Mohd Khamil bin Jamil holds a
TAN SRI DATO’ SRI (DR) HAJI Bachelor of Laws (Honours) Degree
MOHD KHAMIL BIN JAMIL from the University of London and was
Chairman/Non-Independent Non-Executive Director conferred an Honorary Doctorate in
Chairman of Nomination and Remuneration Committee Mechanical Engineering by Universiti
Date of Appointment Date of Last Re-election Pertahanan Nasional Malaysia in
19 July 2005
(Non-Independent Non-Executive Director)
29 September 2016
October 2015. He is a Barrister-at-Law
Nationality/Age/Gender
1 March 2006 Malaysian/61 years/Male at Gray’s Inn, England, and was called
(Group Managing Director)
1 March 2016 to the English Bar in 1983.
(Non-Independent Non-Executive Chairman)
He began his executive career at Bank Bumiputra Malaysia
Berhad in August 1980, where he served until December 1989.
He was called to the Malaysian Bar in September 1990, following
which he became a practising partner of several legal firms
before venturing into business in 2001.
Brig. Gen. (K) Tan Sri Dato’ Sri (Dr) Haji Mohd Khamil does not
have any family relationship with any Director and/or major
shareholder of the Company and has no conflict of interest with
the Company. He has had no conviction for any offence within
the past five (5) years and has not been imposed any public
sanction or penalty by the relevant regulatory bodies during the
financial year ended 31 March 2017.
Brig. Gen. (K) Tan Sri Dato’ Sri (Dr) Haji Mohd Khamil attended
all seven (7) Board meetings of the Company held during the
financial year ended 31 March 2017.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 41
Dato’ Sri Syed Faisal Albar bin Syed A.R. Albar is DATO’ SRI SYED FAISAL
a member of the Malaysian Institute of Certified
Public Accountants (“MICPA”) and American ALBAR BIN SYED A.R. ALBAR
Institute of Certified Public Accountants (“AICPA”). Group Managing Director
He holds a Bachelor of Arts (Accountancy) Degree
from Barat College of DePaul University, Lake Date of Appointment Date of Last Re-election
Forest, USA and AICPA Professional Certification 4 January 2016 29 September 2016
from University of IIIinois, Urbana Champaign, (Group Chief Executive Officer) Nationality/Age/Gender
1 March 2016
USA. He had attended the Advanced Programme (Group Managing Director) Malaysian/52 years/Male
at Harvard Business School, Boston, USA and he
was also a Council Member of MICPA from 2010
to 2013.
Prior to joining DRB-HICOM Berhad, he was the Chief Executive Officer (“CEO”)
of Malakoff Corporation Berhad from 1 July 2014 to December 2015. He was
appointed as CEO of Gas Malaysia Berhad (“GMB”) from January 2014 to June
2014 and also an Executive Director of Pos Logistics Berhad (formerly known
as Konsortium Logistik Berhad) (“PLB”) for a short span of time assisting Ekuiti
Nasional Berhad, the majority owner of PLB, in its disposal of that business.
From 2011 to 2014, Dato’ Sri Syed Faisal served on various boards in
a non-executive capacity. He was on the Board of Malaysia Airports
Holdings Berhad as a nominee Director for Khazanah Nasional Berhad
and was also a Director of Hong Leong Bank Berhad. Within this period,
he also sat on the Board of Kwasa Land Sdn. Bhd.; a wholly-owned
subsidiary of Employees Provident Fund, that was tasked to develop a
township on the parcel of land previously owned by Rubber Research
Institute in Sungai Buloh, Selangor. As part of his effort to contribute to
society, he served on the Board of Yayasan Kelana Ehsan, a public trust
entity that provides funds for charitable activities with the intention to
improve the livelihood of the residents in the State of Selangor.
Dato’ Sri Syed Faisal’s career spans across various executive positions.
Apart from GMB and PLB, from 2008 to 2011, he was the Group
Managing Director of Pos Malaysia Berhad (“Pos Malaysia”), which was
a Government Linked Company by virtue of the 32% shareholding held
by Khazanah then. During his time at Pos Malaysia, he was also the
Chairman of ASEAN Postal Business Union where postal organisations
of each of the ASEAN countries are members. Prior to his stint at Pos
Malaysia, Dato’ Sri Syed Faisal was appointed in 2003 as CEO of The
New Straits Times Press (Malaysia) Berhad (“NSTP”), a position which
he held until 2008. He started his career by spending almost a decade
with PricewaterhouseCoopers Kuala Lumpur since 1991. He had also
served Pricewaterhouse, San Francisco, California in 1995 before
returning to Kuala Lumpur in 1997 and subsequently joined NSTP in
May 2000 as its Chief Financial Officer.
Dato’ Sri Syed Faisal does not have any family relationship with any
Director and/or major shareholder of the Company and has no conflict
of interest with the Company. He has had no conviction for any offence
within the past five (5) years and has not been imposed any public
sanction or penalty by the relevant regulatory bodies during the
financial year ended 31 March 2017.
Dato’ Sri Syed Faisal attended all seven (7) Board meetings of the
Company held during the financial year ended 31 March 2017.
DRB-HICOM BERHAD
42 ANNUAL REPORT 2017
Datuk Ooi does not have any family relationship with any Director and/
or major shareholder of the Company and has no conflict of interest
with the Company. He has had no conviction for any offence within
the past five (5) years and has not been imposed any public sanction
or penalty by the relevant regulatory bodies during the financial year
ended 31 March 2017.
Datuk Ooi attended all seven (7) Board meetings of the Company held
during the financial year ended 31 March 2017.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 43
Dato’ Siti Fatimah does not have any family relationship with
any Director and/or major shareholder of the Company and
has no conflict of interest with the Company. She has had no
conviction for any offence within the past five (5) years and has
not been imposed any public sanction or penalty by the relevant
regulatory bodies during the financial year ended 31 March 2017.
Dato’ Siti Fatimah attended six (6) out of seven (7) Board meetings
of the Company held during the financial year ended 31 March
2017.
DRB-HICOM BERHAD
44 ANNUAL REPORT 2017
DATO’ IBRAHIM BIN TAIB Dato’ Ibrahim bin Taib holds a Bachelor
Independent Non-Executive Director of Laws (Honours) Degree from the
Member of Audit Committee University of Malaya and a Master of
Date of Appointment Date of Last Re-election
Laws from the University of London.
18 March 2004 30 September 2014
He started his career in the judicial service in 1978 as a Magistrate
(Non-Independent Non-Executive Director) Nationality/Age/Gender in the Magistrate Court, Jalan Duta, Kuala Lumpur. Thereafter, he
30 May 2017 Malaysian/63 years/Male was transferred to the Magistrate Court in Segamat, Johor. In 1982,
(Independent Non-Executive Director)
he became a Legal Advisor with the Road Transport Department
and continued in the same role in the Ministry of Human Resources
in 1986.
Dato’ Ibrahim does not have any family relationship with any
Director and/or major shareholder of the Company and has no
conflict of interest with the Company. He has had no conviction for
any offence within the past five (5) years and has not been imposed
any public sanction or penalty by the relevant regulatory bodies
during the financial year ended 31 March 2017.
Datuk Idris bin Abdullah holds a LLB. DATUK IDRIS BIN ABDULLAH
(Honours) Degree from the University Independent Non-Executive Director
of Malaya. Chairman of Board Risk and Sustainability Committee
Member of Audit Committee
He started his career in 1981 in Sibu, Sarawak and was admitted Member of Nomination and Remuneration Committee
to the Roll of Advocates of the High Court of Malaya in Sabah and
Sarawak in 1982.
Date of Appointment Nationality/Age/Gender
1 January 2017 Malaysian/60 years/Male
He has been with Messrs. Idris & Company Advocates, Kuching,
Sarawak since 1985 and is currently its Senior Partner. Datuk Idris was
appointed as a Commission Member of the Companies Commission
of Malaysia from 2007 to 2014. He was also a Commission Member
of the Malaysian Communications and Multimedia Commission from
2011 to 2015.
Datuk Idris does not have any family relationship with any Director
and/or major shareholder of the Company and has no conflict of
interest with the Company. He has had no conviction for any offence
within the past five (5) years and has not been imposed any public
sanction or penalty by the relevant regulatory bodies during the
financial year ended 31 March 2017.
During the financial year ended 31 March 2017, Datuk Idris attended
all the two (2) Board meetings of the Company held subsequent to
his appointment as Director of the Company on 1 January 2017.
DRB-HICOM BERHAD
46 ANNUAL REPORT 2017
Datuk Mohamed Razeek began his career Datuk Mohamed Razeek sits on the Board
as an engineering consultant with a firm in of Pos Malaysia Berhad (listed entity),
London in the late 1970s. Upon returning to Pos Logistics Berhad (formerly known as
Kuala Lumpur in the 1980s, he joined a local Konsortium Logistik Berhad) and several
engineering consulting firm and was involved private limited companies within the
in the construction of the UBN Towers, a DRB-HICOM Group.
development by Peremba-Kuok Brothers.
Datuk Mohamed Razeek does not have any
In 1985, he joined Sime UEP Berhad before family relationship with any Director and/or
moving on to Land & General Group of major shareholder of the Company and has
Companies in 1991. His achievements at no conflict of interest with the Company. He
Land & General saw his appointment as an has had no conviction for any offence within
Executive Director of Land & General Berhad the past five (5) years and has not been
in 1999. He later joined Eastern & Oriental imposed any public sanction or penalty by
Property Development Berhad as a Project the relevant regulatory bodies during the
Director in September 2003 prior to joining financial year ended 31 March 2017.
Dato’ Abdul Harith, a graduate in Arts Dato’ Abdul Harith sits on the Board of
and Design majoring in Industrial Design Edaran Otomobil Nasional Berhad and
Engineering (“IDE”) from University several private limited companies within the
Technology MARA (“UiTM”) in 1985, pursued DRB-HICOM Group. He does not hold any
a postgraduate degree in Automotive Design directorship in any listed company.
at the Royal College of Art in London, UK
in 1990 where he earned a Master Degree Dato’ Abdul Harith does not have any family
(MDES. RCA) in Vehicle Design. During his relationship with any Director and/or major
Masters studies, he received the Wilkins shareholder of the Company and has no
Campbell Chavant Clay Automotive Modelling conflict of interest with the Company. He
Award at the Royal Albert Hall of London. has had no conviction for any offence
within the past five (5) years and has not
Prior to his assignment in DRB-HICOM been imposed any public sanction or penalty
Corporate Office as the Chief Operating by the relevant regulatory bodies during the
Officer of Automotive Distribution and financial year ended 31 March 2017.
Manufacturing & Engineering, he has
DRB-HICOM BERHAD
ANNUAL REPORT 2017 47
Amalanathan Thomas
Group Director - Financial Services
Amalanathan Thomas, a Malaysian, male, Accountants, an Associate Member of both the
aged 58, joined DRB-HICOM Berhad since Chartered Tax Institute of Malaysia, Institute
1983 and was appointed as Group Director of Internal Auditors Malaysia and a member
in January 2016. He was later appointed as of Malaysian Institute of Management.
Principal Officer of DRB-HICOM Berhad on
April 2016. Amalanathan sits on the Board of Composites
Technology Research Malaysia Sdn. Bhd.,
Amalanathan holds a Master of Business DRB-HICOM Environmental Services Sdn.
Administration from University of Malaya Bhd., Edaran Otomobil Nasional Berhad,
and earned Professional Qualification in Gadek (Malaysia) Berhad and several private
Accounting and Taxation. His experience limited companies within the DRB-HICOM
spans over 25 years in the field of finance, Group. He does not hold any directorship in
accounting and taxation. His extensive any listed company.
knowledge of the Group’s businesses and the
relevant industry puts him in the forefront Amalanathan does not have any family
of numerous acquisitions, divestments and relationship with any Director and/or major
debt restructurings carried out in the Group. shareholder of the company and has no
conflict of interest with the Company. He has
Currently, as the Group Director, Financial had no conviction for any offence within the
Services Division, he oversees the Group’s past five (5) years, and has not been imposed
accounting, reporting, and taxation matters. any public sanction or penalty by the relevant
He is a member of the Malaysian Institute of regulatory bodies during the financial year
ended 31 March 2017.
DRB-HICOM BERHAD
48 ANNUAL REPORT 2017
Dato’ Ahmad Fuaad bin Mohd Kenali, a Business Advisory Services Division of Ernst &
Malaysian, male, aged 47, joined DRB-HICOM Young.
Berhad as Chief Financial Officer on 15 August
2013 and was subsequently appointed to his He held various roles in the DRB-HICOM
current position as Chief Executive Officer of Group including as Group Finance &
PROTON on 1 April 2016. Corporate Chief Operating Officer and
Group Chief Financial Officer. He also sat
Dato’ Ahmad Fuaad has more than 23 years on the Boards of several companies under
of accounting, audit and finance experience the stable such as Horsedale Development
under his belt, after obtaining a BTEC Berhad, Pos Logistics Berhad (formerly
National Diploma in Business and Finance known as Konsortium Logistik Berhad) Pos
from Brighton College of Technology, and a Malaysia Berhad and PROTON, prior to being
Bachelor of Science (Hons.) in Computerised made its CEO. Before joining DRB-HICOM in
Accountancy from the University of East 2013, he was the Chief Financial Officer of
Anglia, both in the United Kingdom (“UK”). Astro Malaysia Holdings Berhad.
Dato’ Mohd Shukrie bin Mohd Salleh, a acquisition of Pos Aviation by Pos Malaysia on
Malaysian, male, aged 43, was appointed as 15 September 2016.
Group Chief Executive Officer of Pos Malaysia
on 1 November 2015. On 1 July 2011, he joined Pos Malaysia as
Group Chief Operating Officer and was
Dato’ Mohd Shukrie holds a Bachelor of thereafter re-designated as Covering Group
Business Studies from University of North Chief Executive Officer on 1 February 2013.
London, United Kingdom in 1996. He is a Prior to his appointment as Group Chief
Chartered Accountant with the Chartered Executive Officer of Pos Malaysia on 1
Institute of Management Accountants and November 2015, he was the Chief Executive
the Malaysian Institute of Accountants. Officer of Pos Logistics Berhad (formerly
known as Konsortium Logistik Berhad) (“Pos
He began his career with Public Bank Logistics”).
Securities Sdn. Bhd. and thereafter joined
United Overseas Bank Berhad. He has had Dato’ Mohd Shukrie sits on the Board of Pos
a wide-ranging career enriched by diverse Logistics, PNSL Berhad and several private
experiences in consumer and corporate limited companies within Pos Malaysia
banking, corporate finance and advisory, Group. He does not hold any directorship in
mergers and acquisitions, financial services, any listed company.
risk management, human resources and
procurement. Dato’ Mohd Shukrie does not have any
family relationship with any Director
He joined DRB-HICOM in August 2005, and/or major shareholder of the Company
where he assumed several leadership roles and has no conflict of interest with
including that of Principal Controller, Chief the Company. He has had no conviction
Financial Officer, Chief Operating Officer and for any offence within the past five (5)
Chief Executive Officer in various companies years and has not been imposed any public
within the Group. He was the Group Chief sanction or penalty by the relevant regulatory
Executive Officer of Pos Aviation Sdn. Bhd. bodies during the financial year ended
(formerly known as KL Airport Services 31 March 2017.
Sdn. Bhd.) (“Pos Aviation”), before the
DRB-HICOM BERHAD
50 ANNUAL REPORT 2017
BOARD OF
management
MANAGEMENT
team
Datuk Mohamed Razeek M d Dato’ Abdul Harith Abdullah Shaharul Farez Hassan Dato’ Carol Chan Choy Lin
Hussain Chief Operating Officer - Chief Operating Officer - Group Director - Corporate Affairs
Chief Operating Officer - Services, Automotive Distribution and Properties, Corporate Planning & / Principal Company Secretary
Education & Defence Manufacturing & Engineering Strategy
Dato’ Khalid Abdol Rahman Dato’ Mohamed Hazlan Bin Amalanathan Thomas Aminah Othman
Group Director – Corporate Mohamed Hussain Group Director - Financial Services Group Director – Treasury
Planning & Business Development Group Director - Education
DRB-HICOM BERHAD
ANNUAL REPORT 2017 53
Muhammad Rizal Md Zain Mahmood Abdul Razak Mimi Aisyah Chye Abdullah Rohime Shafie
Head - Group Human Capital Head – Group Strategic Head - Corporate Planning Head - Automotive
Communications / CEO - EON Berhad
Loo Hon Kok Abdul Jamil Johari Cheah Chee Kong Simon Cham Kim Fatt
Head - Property Head - Group Internal Audit Head - Risk Management Head - Group Information
Technology
Ainol Azmil Abu Bakar Norkiah Othman Shafiq Stephen Abdullah Haji Rosli Mohd Hussain
Head – Manufacturing & Head - Group Procurement Head - Group Safety, Health & Head - Outreach Unit
Engineering Environment
DRB-HICOM BERHAD
54 ANNUAL REPORT 2017
accountability
DRB-HICOM BERHAD
56 ANNUAL REPORT 2017
STATEMENT ON
corporate
governance
The Board of Directors (“Board”) and Management of DRB-HICOM basis and for the ensuing year. The Group adopted a structured
Berhad (“DRB-HICOM” or “the Company”) are committed in ensuring approach in the preparation of the AMP for the companies in the
that the highest standards of corporate governance are practised Group with guidance and consultation from the Corporate Office.
throughout the Company and its subsidiaries (“Group”) as a The AMPs prepared by the operating companies were reviewed
fundamental part of its responsibilities in managing the businesses and challenged by the representatives from the Corporate Office
and affairs of the Group, protecting and enhancing stakeholders’ during the Challenge meetings before the AMPs were finalised and
values as well as financial performance while promoting the presented to the Boards of the respective Group companies and the
highest standards of integrity, transparency and accountability. The Board of the Company for consideration and approval.
Company abides strictly by the governing laws and regulations of the
jurisdictions where it operates and observes the applicable guidelines The AMP of the Group and the Company for the financial year ended
and rules issued by the relevant regulatory authorities. 31 March 2017 (“AMP 2017”) was approved by the Board during the
Board meeting held on 30 March 2016. During the presentation
The Company has adopted and complied with the Malaysian Code on of the AMP 2017 of the Group at the Board meeting, the Board
Corporate Governance 2012 (“MCCG 2012”), by observing the specific discussed the economic landscape and the possible impact on the
principles and recommendations on structures and process which Group’s future performance, the business plan, the projections in the
companies should adopt in making good corporate governance an AMP, the key challenges and issues faced by the Group, the proposed
integral part of their business dealings. restructuring activities for the subsidiaries as well as the strategies to
be implemented to improve the performance of the non-performing
The Board is pleased to present this statement which sets out the
companies in the Group.
manner in which the Company has applied the principles and
recommendations as set out in the MCCG 2012 and the extent of its The Board also reviewed and approved the corporate key performance
compliance with the principles, during the financial year ended 31 indicators (“KPIs”) used to track the Groups’ performance against
March 2017. the targets. These would ensure the financial performance and the
businesses of the Group are properly managed and the shareholders’
1. BOARD OF DIRECTORS values are safeguarded.
1.1 Duties and Responsibilities of the Board To ensure the achievement of the Group’s overall strategic direction
and the AMP, yearly KPIs have been formulated for the Group
The Board has the following six (6) specific responsibilities, which
Managing Director (“GMD”) and these KPIs are cascaded down to the
facilitate the discharge of the Board’s responsibilities in the best
leadership team and other Management team members at Corporate
interest of the Company:
Office as well as the Chief Executive Officers/Chief Operating Officers
of the subsidiary companies.
i. Adopting and reviewing the strategic plan for the
Company
The Board recognises the importance of business sustainability in
The Board has the overall responsibility in leading and determining conducting the Group’s businesses taking into consideration the
the Group’s overall strategic plan and direction as well as development impact on our main stakeholders namely; customers, shareholders,
and control of the Group without neglecting the shareholders’ employees, business partners, vendors, suppliers, social community
interest. The strategic plan of the Group includes oversight on risks, and the environment at large. The Board reviews the sustainability
strategies, marketing and financial aspects of the business. aspects of the strategic direction to ensure the Group achieves the
targets in line with the fast changing business landscape. Details of
The Board approves and adopts the Group’s Annual Management sustainable activities that were undertaken by the Group are disclosed
Plan (“AMP”) inclusive of the overall strategic direction on a yearly in the ‘Sustainability Report’ contained in this Annual Report.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 57
In addition, the Board reviews the Company’s funding requirements Management staff, related party transactions, significant business
and treasury matters on a continuous basis including the approval of decisions and other relevant matters affecting the Group’s operations
financial arrangements. and business.
ii. Overseeing the conduct of the The Board meets at least once every quarter and as and when
Company’s business to evaluate whether the required to discuss on the businesses conducted by the Group.
business is being properly managed and During the Board meetings held in the financial year under review,
sustained
the GMD presented detailed progress reports on the business
The Board provides entrepreneurial leadership and specifies the operations and development plan of the Group by sectors/
parameters within which Management decisions are to be made. companies, financial performance for the period compared to the
High integrity practice is adopted by all the Board members to AMP and the corresponding period last year as well as updates on
avoid improper use of information, conflict of interest, secret the key strategic activities, key corporate exercises, significant events
profit, contract with the Company and any other corrupt activities. of the Group and achievements of the Company.
In discharging its responsibilities, the Board has established the During the Board meetings, the Directors also discussed matters
appropriate internal control systems to support, promote and ensure arising from the minutes of previous Board meeting until the matters
compliance with the laws and regulations governing the Company. were duly resolved, strategy implementation by the Management
This includes taking into account the Company’s continuing viability and reports of the various Board Committees.
The Board retains full and effective control of the Group by reviewing
the Management’s performance against the AMP periodically and iii. Identifying principal risks and ensuring the
implementation of appropriate systems to
ensuring that the necessary financial and human resources are manage these risks
available to meet the Group’s objectives.
The Board is responsible in reviewing principal risks, establishing
To ensure an optimum structure for efficient and effective decision-
appropriate controls and action items to ensure that the obligations
making, the Boards of the Group, approved a framework on Limits
to the shareholders and other stakeholders are met. The Board is
of Authority (“LOA”) to reflect the flows of authority and functions
also responsible to oversee sustainability related risks and ensure
of the GMD and Management. The LOA defines the type and limits
that sustainability is integrated within the key business areas and
of authority designated to specified positions of responsibility.
ensuring the collective achievement of the sustainability goals across
It also specifies a formal schedule of matters reserved for the
the organisation.
Board’s deliberation and approval. This is to ensure that there
are clear functions of the Board and the Management within the The above functions of the Board are delegated to the Board Risk and
Group. The LOA is reviewed as and when required according to Sustainability Committee (“BRSC”), which is supported by the Group
the circumstances and operational requirements of the Group. Risk Management Committee (“Group RMC”) headed by the GMD.
Among the key matters reserved for approval by the Board are the The Board through the BRSC oversees the risk management activities
business strategy, AMP, interim and annual financial statements, and processes of the Group. The BRSC also oversees the formulation of
investment activities, significant acquisitions and disposals, relevant risk management policies and risk measurement parameters
major restructuring and reorganisation, funding arrangements, across the Group and makes the appropriate recommendations to
expenditures above certain prescribed limits, interim dividend the Board for its approval. The BRSC is responsible for ensuring that
and declaration of final dividend, appointment of Directors/Board the risk management framework in the Group operates effectively
Committee members, remuneration for GMD and certain Senior based on the policies approved by the Board.
DRB-HICOM BERHAD
58 ANNUAL REPORT 2017
The Group RMC reviews and presents the identified key risks to the A Group Talent Management Programme has been introduced
BRSC on a quarterly basis prior to submission to the Board. During to ensure adequacy of talent for business continuity of the Group.
the BRSC meetings held in the financial year ended 31 March 2017, Potential talents are identified by the Group Human Capital through
the BRSC discussed the Group’s risk report, top key risks of the major a series of selection and assessment processes. All identified talents
subsidiaries, outlook of the various business sectors, concerns of the and potential successors for key positions in the Group will undergo
Group and matters arising therefrom. a structured talent development programme, which includes
mentoring and coaching.
On a quarterly basis, the Board reviewed and discussed the report
on Enterprise Risk Management which encompassed the Group’s Top During the financial year ended 31 March 2017, the Board in
Key Risks and the recommendations from the BRSC. overseeing the succession planning of the Company had considered
and approved a number of changes to the directorate of the Company
Salient features of the risk management methodologies are disclosed
and its subsidiaries as well as the appointment and promotions of
in the report on ‘Risk Management’ contained in this Annual Report.
Senior Management of the Company.
iv. Succession planning, including appointing, Details of the activities undertaken by NRC for the financial year
training, fixing the remuneration and where
appropriate, replacing Senior Management of the ended 31 March 2017 are set out on page 67 to 68 of this Annual
Company Report.
In determining the succession planning for Board members, the v. Developing and implementing an Investor
Board is guided by the recommendations of the MCCG 2012 and Relations programme or shareholder
communications policy for the Company
the Main Market Listing Requirements (“MMLR”) of Bursa Malaysia
Securities Berhad (“Bursa Malaysia”) which stipulates that each
The Board recognises the importance of maintaining transparency
Director should have the character, experience, integrity, competence
and accountability to the shareholders and all other stakeholders.
and time to effectively discharge his/her role as a Director, taking
The Group Investor Relations (“IR”) had been entrusted with the
into account the future needs and way forward for the Company.
responsibility to handle IR and communications with the shareholders.
The Nomination and Remuneration Committee (“NRC”) has been The key IR initiatives undertaken by the Company during the financial
entrusted with the responsibility to review candidates for appointment year under review are set out in the report on ‘IR’ contained in this
to the Board, Board Committees and Senior Management for Annual Report.
The succession planning for Senior Management Grade 11 and time as to provide the latest information about the Group, which
above is deliberated by the NRC which then makes the necessary encompassed amongst others, corporate information, corporate
recommendations to the Board for consideration and approval. responsibility activities, annual reports, press releases, financial
The succession planning for other Senior Management positions is results of the Group and announcements to Bursa Malaysia.
on the preparation and submission of timely, true and fair financial The Group’s Statement on Risk Management and Internal Control,
disclosures and material announcements to Bursa Malaysia. This which provides an overview of the state of internal controls within
would enhance the Company’s compliance, accountability and timely the Group, is contained in this Annual Report.
disclosures to all the shareholders and stakeholders. The Corporate
1.2 Board Charter
Disclosure Policy of the Company is available on the website of the
Company.
The Company had established a Board Charter which clearly sets out
the Board’s functions, duties and responsibilities, including division of
vi. Reviewing the adequacy and integrity of responsibilities between the Board, the different Board Committees,
the Company’s internal control systems and the Chairman and the GMD. It is a source of reference and primary
management information systems, including
systems for compliance with applicable laws, induction literature, providing insights to prospective Board members
regulations, rules, directives and guidelines and Senior Management.
The Board has the overall responsibility to maintain an internal control The Board Charter adopts principles of good governance and is
system that provides reasonable assurance on the effectiveness and designed to maximise the Company’s compliance with the best
efficiency of operations, conformance with laws and regulations, as practice requirements. The Board Charter is reviewed as and when
well as with internal procedures and guidelines. necessary to ensure it remains consistent with the Board’s objectives
and responsibilities, and all the relevant standards of corporate
The effectiveness of the internal control system of the Group is governance.
reviewed by the Audit Committee (“AC”) periodically during its quarterly
meetings. The review covers the Group’s financial, accounting and The Board Charter is available on the website of the Company. It was
reporting policies and practices as well as the adequacy of the reviewed and amended during the year in line with the regulatory
internal control system to safeguard the shareholders’ interests and changes. The Board Charter was last reviewed by the Board on
The current Board consists of six (6) members, namely, one (1)
The Company adopts the tenure limit of nine-year for Independent
Executive Director, two (2) Non-Independent Non-Executive Directors
Directors, as recommended under the MCCG 2012. The nine-year
(including the Chairman) and three (3) Independent Non-Executive
tenure can either be based on a consecutive service of nine (9)
Directors. The appoinment of YBhg Brig. Gen. (K) Tan Sri Dato Sri (Dr)
years or a cumulative service of nine (9) years with intervals. Upon
Haji Mohd Khamil bin Jamil, the former GMD of the Company, as the
completion of the nine (9) years, an Independent Director may
Non-Independence Non-Executive Chairman of the Company was in
continue to serve on the Board subject to the Director’s re-designation
view of his proven track record in managing and transforming the
as a Non-Independent Director. The Board, based on the assessment
DRB-HICOM Group.
by the NRC, may seek shareholders’ approval in a general meeting to
The Company has complied with the minimum compliance level retain the Independent Director who has reached the tenure limit to
set under the MMLR which requires one-third of the membership continue as Independent Director with justification.
of the Board to be Independent Board members. The Board takes 1.4 Board Diversity
cognisance of the practices set out in the new Malaysian Code on
Corporate Governance released in April 2017, which stipulates The Board values diversity as a factor in selecting candidates to
that for large companies, the Board should comprise a majority of serve on the Board and believes that the diversity which exists in
independent directors. Currently, the Independent Directors make its composition provides significant benefits to the Board and the
up 50% of the Board membership. The Board will continue to source Company.
for suitable candidates for appointment as additional Independent
Directors of the Company. The Board considers that diversity includes differences that relate to
gender, age, ethnicity, skills, knowledge, qualification and experience.
The composition, experience and balance of skills of the Board are The Board will continue to focus on diversity as it has in recent
reviewed annually to ensure that the mix of skills and experience is years, to ensure that there is an appropriate mix of diversity, skills,
appropriate to meet the needs of the Group. experience and expertise represented on the Board.
The Board members with their diverse academic qualifications, The Board recognises that gender diversity is of importance to
background, skills, experiences and professional expertise enable the boardroom diversity. Nevertheless, the normal selection criteria
Board to provide clear and effective leadership to the Group as well based on an effective blend of competencies, skills, characteristics,
as sharing experiences and ideas and make independent judgement extensive experience and knowledge to strengthen the Board will
to many aspects of the Group’s strategy and performance so as to remain a priority. As such, the Company does not set any specific target
enhance the Board’s decision making capabilities and ensuring that for female Directors in the Board composition. Notwithstanding this,
the highest standards of professionalism, conduct, transparency and the Board will continue to encourage and support for more women
integrity are maintained by the Group. A brief profile of each Director participation on the Board, as and when vacancies and circumstances
is contained in this Annual Report. permit.
No individual or group of individuals dominates the Board’s decision During the financial year under review, YBhg Dato’ Siti Fatimah binti
making. The Independent Directors play an important and pivotal Daud, a nominee Director of the Minister of Finance Incorporated,
role in corporate accountability and they represent the interest of was appointed to the Board on 1 April 2016.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 61
1.6 Roles and Responsibilities of the directorships in public listed companies do not exceed the maximum
Chairman and the GMD five (5) directorships permitted by the MMLR. The Directors are
required to notify the Company in a timely manner of any changes to
The Chairman of the Company represents the Board to the their list of directorships in public and private companies.
shareholders. He is responsible for ensuring the integrity and
effectiveness of the governance process of the Board and will 1.8 Appointment
consult with the Board promptly over any matter that gives him
cause for major concern. In addition, he is responsible for providing There is a formal and transparent procedure for the appointment
clarifications to the shareholders at the Company’s general meetings of new Directors to the Company and the Group, the primary
and ensuring Board effectiveness and proper conduct. responsibility of which has been delegated to the NRC to ensure that
any decisions made are in the best interest of the Company.
The Chairman will act as a facilitator at Board meetings and ensure that
no Board member, whether executive or non-executive, dominates The nomination and election of the Board members involves certain
the discussion and that appropriate discussion takes place and process. The Board will seek recommendation/referral from the
relevant opinions among the Board members are forthcoming. The existing Directors to source and nominate suitable candidates for
Chairman encourages a healthy debate on issues raised at meetings, appointment as Directors to fill the Board vacancies or to complement
and gives opportunity to Directors who wish to speak on the motions, the existing Board. When candidates are identified, NRC will evaluate
either for or against them. the suitability of the candidates based on the criteria set and make
the necessary recommendation to the Board for approval. The Board
Concurrently, the GMD has the overall responsibility for will then make the final decision on the appointment of Director.
management of the operating units, organisational effectiveness
and implementation of Board policies, decisions and strategies. He The NRC’s assessment criteria of the candidates includes, but not
reports to the Board and is responsible for communicating matters limited to, consideration of the relevant knowledge and diversity of
and issues relating to the Group’s business affairs to the Board. backgrounds, professional qualifications, skills, experience, personal
qualities and perspectives that would complement the existing
The segregation between the duties of the Chairman and GMD Board as well as the time commitment and other directorships
ensures appropriate balance of role, responsibility and accountability in public listed companies. The NRC also considers the gender
at the Board level. Their roles and responsibilities are set out in the diversity when reviewing the gender proportion of the Directors
Board Charter which is available on the website of the Company. during the assessment. In the case of a candidate for the position
of an Independent Director, the NRC would consider the candidate’s
ability to discharge such responsibilities/functions as expected of an
Independent Director.
DRB-HICOM BERHAD
62 ANNUAL REPORT 2017
Subsequent to the appointment of new Directors to the Board, the Apart from attending the various conferences, seminars and training
Company will arrange for an induction programme for the new programmes organised by the external/internal organisers, the
Directors, including visits to the Group’s significant businesses and Directors also visit the key operating units of the Group, if necessary.
meetings with the Senior Management, to enable the new Directors The Directors also continuously receive briefings and updates on
to get a full understanding of the nature of the businesses, the regulatory, industry and legal developments, including information
current issues within the Group and corporate strategies as well as on the Group’s businesses and operations, risk management activities
the structure and management of the Group. and other initiatives undertaken by the Management.
Following the evaluations by the NRC which were based on a set The particulars of the seminars, conferences and training programmes
of assessment criteria, the Board on the recommendation of the attended by the Directors, save for the Directors who had retired
NRC approved the appointment of YBhg Datuk Idris bin Abdullah or resigned during the financial year ended 31 March 2017, are as
as an Independent Director of the Company on 1 January 2017 to summarised below:
complement the Board composition.
Directors Trainings Attended
YBhg Datuk Idris bin Abdullah attended the induction programme Brigadier General (K) Tan • Sustainability Reporting
Sri Dato’ Sri (Dr) Haji Mohd • Industry Workshop on Logistics and
organised by the Company to assist him to familiarise with the
Khamil bin Jamil e-Commerce
matters relating to the Company’s business activities, the strategic
• Enhanced Auditor’s Report Standards
directions and policies, the regulatory environment in which the • Companies Act 2016
Group operates, the Company’s corporate governance practices and
Dato’ Sri Syed Faisal Albar bin • Trans-Pacific Partnership Agreement
others.
Syed A.R. Albar Briefing Session
• Sustainability Reporting
1.9 Training • Enhanced Auditor’s Report Standards
• Companies Act 2016
The NRC has been entrusted by the Board to evaluate the training
needs of the Directors including provision of continuous trainings for Dato’ Ibrahim bin Taib • Sustainability Reporting
• Enhanced Auditor’s Report Standards
all Directors of the Company.
• Related Party Transaction - Their
implications to the Board of Directors,
All existing Directors, including the newly appointed Director, have
Audit Committee and Management
completed the Mandatory Accreditation Programme prescribed • Companies Act 2016
by Bursa Malaysia. The Directors are encouraged to attend the
Datuk Ooi Teik Huat • How to Build or Burn Trust in an
continuous education programmes and seminars held from time to
Organisation - A Conversation with
time to keep themselves abreast with the latest developments in the Andrew Fastor
marketplace as well as to further enhance their business acumen and • Sustainability Reporting
• Competition Law Talk
professionalism in discharging their duties to the Group.
• Enhanced Auditor’s Report Standards
• Financial Outlook 2017
In addition, the Directors may request at the expense of the
• Audit Committee Leadership Track
Company to attend additional relevant training courses based on • Companies Act 2016 and its
their individual needs as a Director or member of Board Committees implications to directors
• Companies Act 2016
on which they serve. A dedicated training budget for the Directors’
• Global Transformation Forum
continuing training is provided each year to ensure that the Directors
are well equipped with the relevant skills and knowledge to meet the
Dato’ Siti Fatimah binti Daud • Directors’ Duties, Business Ethics and
challenges ahead. (Appointed on 1 April 2016) Governance
• Mandatory Accreditation Programme
The Company Secretary keeps a complete record of the trainings • Sustainability Reporting
attended by the Directors and from time to time, the Company • Enhanced Auditor’s Report Standards
• Companies Act 2016
Secretary will forward relevant training brochures to the Directors for
their consideration.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 63
Directors Trainings Attended good mix of governmental and industry-specific knowledge, broad
Datuk Idris bin Abdullah • Evolution of Enterprise Risk business sense and commercial experience. These include business,
(Appointed on 1 January 2017) Management Models corporate and entrepreneurial sectors, legal, finance, accounting
• Companies Act 2016 and its
and economics. The overall performance of the Board and Board
implications to directors
Committees for the financial year ended 31 March 2017 was rated
The NRC had assessed and reviewed the list of training programmes consistently good.
attended by the Directors during the financial year ended 31 March
2017. The NRC was satisfied that the trainings attended by the 1.11 Re-election of Board members
Directors were appropriate and adequate to enhance the Directors’ In accordance with the Company’s Constitution, all Directors shall
skills and knowledge in discharging their duties as Directors. retire from office by rotation once every three (3) years but shall
be eligible for re-election. The Constitution also provides that any
The NRC will, on a continuing basis, evaluate the training needs of
Director appointed during the year should hold office only until the
the Directors, particularly those relating to new laws and regulations
next Annual General Meeting (“AGM”) and should then be eligible for
including the essential practices for effective corporate governance,
re-election. The GMD also ranks for re-election by rotation.
to enable the Directors to continue to participate actively in Board
deliberations and decision making. The NRC reviews and assesses annually the Directors who are seeking
for re-election at the AGM of the Company. The NRC will, upon its
1.10 Board Effectiveness
review and assessment, submit its recommendation on the proposed
The Board, through its delegation to the NRC, had implemented the re-election of Directors to the Board for approval, before tabling
process for an annual effectiveness assessment of the Board, Board such proposals to the shareholders at the AGM. The re-election of
Committees and the contribution of each Director to the effectiveness Directors provide the shareholders an opportunity to re-assess the
of the Board. The objective is to improve the Board’s effectiveness by composition of the Board.
identifying gaps, maximising strengths and addressing weaknesses.
If the retiring Directors are Independent Directors, the NRC and the
The NRC assesses the performance of the Board, Board Committees Board would also take into consideration the annual assessment on
and the contribution of each Director annually using the self- independence carried out on the Independent Directors based on the
assessment methodology. Customised questionnaires are sent to the criteria of independence prescribed under the MMLR.
Directors for completion and the areas of evaluation cover the Board/
Board Committee size, composition and effectiveness, information The Board through the NRC and having considered the eligibility
management, accountability, communication with management, and suitability of the Directors who are subject to re-election in
performance in discharging the duties, time allocation, quality of accordance to the Company’s Constitution, is of the opinion that YBhg
information and decision making. The Board also assesses the Board Dato’ Ibrahim bin Taib, YBhg Datuk Ooi Teik Huat and YBhg Datuk Idris
Committees’ performances through their regular reports to the bin Abdullah meet the criteria of character, skill, experience, integrity,
Board on their activities. For evaluation of individual Directors, the competence and time commitment to effectively discharge their roles
areas of assessment are on fit and proper standing, contribution, as Directors and recommend their re-election for the shareholders’
performance, corporate integrity, commitment, capability and others. approval at the 27th AGM of the Company.
The Company Secretary will collate the results of the appraisals In addition, the NRC had assessed and the Board had endorsed
received from the Directors for submission to the Chairman of the that all the Independent Directors including those who are seeking
NRC who oversees the overall evaluation process. for re-election at the 27th AGM of the Company comply with the
independence criteria as prescribed in the MMLR and have remained
The NRC, pursuant to its recent annual review and assessment,
independent in exercising their judgement and in carrying out their
is satisfied that the size and composition of the Board and Board
duties as Independent Directors. All the Independent Directors
Committees are appropriate and well balanced to fairly reflect the
have also provided the NRC with written confirmations on their
interests of major and minority shareholders of the Company. The
independence during the annual assessment exercise conducted for
NRC is also satisfied that all members of the Board are suitably
the financial year ended 31 March 2017.
qualified in view of their respective competency, character, integrity,
qualifications and experience which provide the Board with a
DRB-HICOM BERHAD
64 ANNUAL REPORT 2017
1.12 Directors’ Code of Ethics and fit the year’s Board meetings into their own schedules. The
Board meets at least four (4) times a year, once every quarter and
The Directors continue to observe the Directors’ Code of Ethics
additional meetings are convened between the scheduled meetings
established by the Company in carrying out their fiduciary duties and
as and when necessary where any direction or decisions are required
responsibilities. It sets out the principles that the Directors need to
expeditiously from the Board. To assist the Board in managing the
observe particularly in respect of conflict of interest and guidelines
Group, the Board meetings are governed by a structured formal
on acceptance of gifts. This is to ensure that high ethical standards
agenda and schedule of matters arising for approval or notation with
are upheld, and that the interests of stakeholders are always taken
sufficient time given for deliberations.
into consideration. The Directors’ Code of Ethics is set out in the
Board Charter of the Company which is available on the website of All Directors will receive the agenda and a set of Board Papers
the Company. containing information relevant to the matters to be deliberated at
the meetings at least 5 working days prior to the Board meetings.
The Directors are required to declare their direct and indirect
This is to accord sufficient time for the Directors to review the Board
interests in the Company and related companies. It is also the
Papers and if required, seek clarification and explanation from the
Directors’ responsibility to declare to the Board whether they and any
Management or the Company Secretary.
person(s) connected to them have any potential or actual conflict of
interest in any transaction or in any contract or proposed contract At the Board meeting, the Chairman encourages the Board
with the Company or any of its related companies. Any Director who members to have constructive, open and healthy debates to
has an interest in any related party transaction shall abstain from ensure that decisions are made unanimously or by consensus after
Board deliberation and voting and shall ensure that he/she and any due discussions by the Directors. The Board is able to arrive at a
person(s) connected to him/her will also abstain from voting on the considered decision with the information and clarification provided
resolution before them. by the Management and professional advisors.
Directors Attendance She is also responsible for ensuring that all the meetings are
convened in accordance with the Board procedures and relevant
Brigadier General (K) Tan Sri Dato’ Sri (Dr)
7/7
Haji Mohd Khamil bin Jamil terms of references.
All current Directors have more than adequately complied with To ensure the effective discharge of its fiduciary duties, the Board has
the minimum requirement on attendance at Board meetings as delegated specific responsibilities to the respective Committees of the
stipulated in the MMLR (minimum 50% attendance). Board but retains full responsibility for the direction and control of
the Group. All the Board Committees, have written terms of reference
1.14 Company Secretary which state clearly their functions and responsibilities. The Board
reviews the functions and terms of reference of Board Committees
The Company Secretary of DRB-HICOM, who is a member of the
from time to time to ensure that they are relevant and updated in
Malaysian Institute of Accountants and Malaysian Institute of Certified
line with the provisions of the MCCG 2012 and other related policies
Public Accountants, is experienced, competent and qualified to act
or regulatory requirements.
as Company Secretary under Section 235 of the Companies Act 2016
(“Act”). The appointment and removal of the Company Secretary is a The Chairmen of the respective Board Committees report to the
matter for the Board as a whole. All Board members have separate Board on the outcome of Board Committee meetings which require
and independent access to the advice and services of the Company the Board’s attention and direction and the Board also reviews the
Secretary to facilitate the discharge of their duties. minutes of the Board Committee meetings.
The Company Secretary is responsible to the Board for ensuring The Board has established three (3) Board Committees namely,
that Board policies and procedures are complied with and advising Audit Committee, Board Risk and Sustainability Committee as well
the Board, particularly with regard to the Company’s Constitution, as Nomination and Remuneration Committee. Details of the Board
governance matters as well as compliance with the applicable laws, Committees of the Company and the attendances at the Board
rules and regulations. In addition, the Company Secretary also Committees’ meetings held during the financial year ended 31 March
updates the Board regularly on amendments to the MMLR, circulars 2017 are as follows:
from Bursa Malaysia and matters relating to statutory obligations and
directives issued by the regulatory authorities from time to time.
The AC comprises the following Independent Non-Executive Directors and their attendances at the AC meetings held in the financial year
ended 31 March 2017 are as follows:
Members Attendance
The AC meets not less than four (4) times a year and twice with the internal and external auditors without the presence of the Management.
The Terms of Reference and functions of the AC are set out in the Board Charter which is available on the website of the Company.
The NRC comprises the Non-Independent Non-Executive Chairman and two (2) Independent Non-Executive Directors and their attendances
at the NRC meetings held in the financial year ended 31 March 2017 are as follows:
Members Attendance
Brigadier General (K) Tan Sri Dato’ Sri (Dr) Haji Mohd Khamil bin Jamil (Chairman) 1/1
The MCCG 2012 recommends that the Senior Independent Director g) Reviewed the training programmes attended by the Directors to
of the Company be appointed as Chairman of NRC. The Board ensure all Directors received appropriate continuous training;
having considered the MCCG 2012’s recommendation and after due
consideration, decided to appoint YBhg Brigadier General (K) Tan Sri h) Recommended revision to the Terms of Reference of NRC to be
Dato’ Sri (Dr) Haji Mohd Khamil bin Jamil as Chairman of NRC primarily in line with the amendments to the MMLR;
a) Considered and recommended the appointment of new discharge his role efficiently.
Directors for the Company and its key subsidiary and associated
In assessing the retention of YBhg Datuk Ooi Teik Huat who will reach
companies;
the nine (9) years tenure as an Independent Director on 1 November
b) Considered and recommended the Directors who were eligible 2017, the NRC and the Board are of the view that he has continued
for re-election and re-appointment at the 26th AGM as well as to remain objective and independent-minded in his participation
the Independent Directors whose terms of office had exceeded in the deliberations and decision making of the Board and Board
nine (9) years to be retained as Independent Directors pursuant Committees. He has constantly sought clarifications and challenged
to the MCCG 2012; the Management when necessary as well as expressed unbiased
views without any influence and is objective in his scrutiny.
c) Reviewed the structure, size, balance and composition of the
Board and its Committees; Moreover, the Board believes that length of time is not the sole
determinant of his credibility and effectiveness as Independent
d) Conducted the annual assessment on the effectiveness of the Director since it does not in any way affect or interfere with his
Board and its Committees as well as the contribution of each exercise of independent judgment and ability to act in the best
Director; interests of the Company and the Group.
e) Reviewed the terms of office and performance of AC and each of The NRC and the Board are confident that he will continue to discharge
its members; his duties diligently, independently and objectively notwithstanding
his tenure on the Board based on the following reasons:
f) Conducted the annual assessment of the independence of the
Independent Directors;
DRB-HICOM BERHAD
68 ANNUAL REPORT 2017
operations including the issues and concerns of the Group Tan Sri Marzuki bin Mohd Noor 3/3
(Ceased as member and Chairman on 1 January 2017)
which allows him to participate actively and contribute positively
during deliberations or discussions at both the Board and its Ong le Cheong 1/1
(Appointed as member on 29 September 2016 and ceased as
Committees meetings;
member on 1 January 2017)
d) He has devoted sufficient time and effort in attending all the * Dato’ Siti Fatimah binti Daud was absent for the meeting due to medical leave.
investments and the Group assets. The Group RMC is chaired by the
- Fees 904,707 744,570
- Attendance, other allowances and benefits
GMD and comprise of representatives from the respective sectors 2,043,160 169,500
and divisions. Executive Director:
- Salaries, bonuses, allowances and other benefits 3,970,834 -
The Board through the BRSC oversees the risk management and Total 6,918,701 914,070
sustainability activities of the Group. The Group RMC formulates
proposals on risk management and sustainability policies including
Group Company
the respective measurement parameters across the Group and
*Directors’
makes appropriate recommendations to the Board for its approval Remuneration **Non- **Non-
Executive Executive Executive Executive
upon endorsement by the BRSC. The BRSC is responsible for ensuring
that the risk management and sustainability framework in the Group
Below RM50,000 - 1 - 2
operates effectively based on the policies approved by the Board.
The Group RMC reviews and presents the identified key risks and
RM50,001 - RM100,000 - 1 - 1
action plans to mitigate the risks to the BRSC for endorsement before
submission to the Board for approval. RM100,001 - RM150,000 - 2 - 4
The objectives of the Group’s policy on Directors’ remuneration are RM200,001 - RM 250,000 - 1 - -
Details of Directors’ remuneration for the financial year ended ended 31 March 2017 is lower at RM744,570 compared to RM750,750
31 March 2017, distinguishing between Executive and NEDs in for the financial year ended 31 March 2016. The lower amount of fees
aggregate, with categorisation into appropriate components, and the paid to the NEDs was due to retirement and resignation of Directors
during the financial year ended 31 March 2017.
DRB-HICOM BERHAD
70 ANNUAL REPORT 2017
The annual Directors’ fee structure for the financial year ended 31 these personnel together with rewards due are rigorously undertaken
March 2017 has remained unchanged compared to the preceding at the Management and NRC levels with the Board making the final
financial year ended 31 March 2016 as follows: determination pursuant to the recommendations of the NRC.
Chairman 140,000 17,000 10,000 10,000 The NRC as well as the Board ensure that the remuneration packages
of Key Senior Management Personnel are sufficiently attractive
Each Member 90,000 12,000 8,000 8,000
to retain persons of high calibre in tandem with their respective
contributions for the year. This would ensure that the Group’s
ii. Meeting Allowance remuneration packages remain competitive and are in line with
the Group’s corporate objectives to safeguard the interest of the
All NEDs are also paid meeting allowances as determined by the shareholders.
The adoption of the KPIs was part of the overall governance to The Board values dialogue with investors and appreciates the keen
enhance the performance management, financial performance and interests of shareholders and investors in the Group’s performance.
shareholders’ value of the Company. The KPIs were formulated based The Board acknowledges the need for shareholders to be informed
on two (2) main segments namely; Corporate/Financial and Priorities. of all material business matters affecting the Group.
For the GMD and the Senior Management, greater emphasis was
In line with the Company’s Corporate Disclosure Policy, the Company
placed on sustainability of growth which was underpinned by the
is fully committed in maintaining transparency and accountability to
relevant financial factors.
all its shareholders and stakeholders through consistent disclosures
The performance-based bonuses are strictly tied to the achievement of of relevant and comprehensive information on timely manner to all
their KPIs. The bonus formula is designed to promote additional effort investors including the minority shareholders. This is to ensure that
and initiatives beyond the KPI targets. Performance assessments of all the Company’s shareholders are treated equitably and the rights
of all investors, including minority shareholders are protected.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 71
The Company communicates with its shareholders and stakeholders to the questions raised by the shareholders at the AGM provided the
on regular basis through timely releases of financial results on a questions are related to the business activities of the Group. Replies
quarterly basis, press releases and announcements to Bursa Malaysia to the questions raised by the Minority Shareholder Watchdog Group
which provide an overview of the Group’s performance and operations prior to the AGM are shared with all shareholders during the AGM.
for investment decision making, through accessible channels. In
addition, the Company initiates dialogues with its shareholders and The voting on resolutions at general meetings are conducted by way
stakeholders as and when required. Media coverage on the Group is of poll in line with the MMLR. The polling process is conducted upon
initiated at regular intervals to provide wider publicity and improve completion of the deliberations of all items set out in the notices of
The Company supports the principle of encouraging shareholders’ Any queries or concerns regarding the Group may be conveyed to the
participation and voting at general meetings of the Company which following designated senior personnel of the Company:
are the principal forum for dialogue with the shareholders. It also
i. YBhg Datuk Ooi Teik Huat
provides opportunities for interaction amongst the shareholders,
Senior Independent Non-Executive Director
Directors and Management.
Tel: (03) 2078 0003 ; Fax: (03) 2032 3128
The Company sends out the notices convening general meetings E-mail: meridiansol@outlook.com
to all shareholders at least fourteen (14) days before the date of
ii. YBhg Dato’ Sri Syed Faisal Albar bin Syed A.R. Albar
the meeting or at least twenty-one (21) days before the date of the
Group Managing Director
meeting where any special resolution is to be proposed or where
Tel: (03) 2052 7772 ; Fax: (03) 2052 7752
it is an AGM. Items of special business included in the Notice of
E-mail: syed.faisal@drb-hicom.com
AGM are accompanied by an explanatory statement to facilitate full
understanding and evaluation of the issues involved. iii. YBhg Dato’ Carol Chan Choy Lin
Group Director, Corporate Affairs/Company Secretary
All Directors attend the general meetings of the Company, unless Tel: (03) 2052 7695 ; Fax: (03) 2052 7696
unforeseen circumstances prevent them from attending these E-mail: cclin@drb-hicom.com
meetings. In order to promote participation by members/proxies/
corporate representatives at general meetings of the Company, 3. ACCOUNTABILITY AND AUDIT
before the commencement of the general meetings, the Chairman
3.1 Financial Reporting
will brief the members, proxies and corporate representatives who
attend the meetings of their rights to speak and vote on the resolutions Pursuant to the MMLR, the Directors are responsible to present a true
set out in the Notice of General Meetings. At every AGM, helpdesks and fair assessment of the Group’s position and prospects through
are set up as a contact point for the shareholders’ enquiries. the quarterly reports, issuance of annual audited financial statements
and corporate announcements on significant developments affecting
For AGM of the Company, the proceedings normally commence the Group.
with a presentation by the GMD on the progress and business
performance of the Group followed by the agenda of AGM. The This would ensure that shareholders are provided with a balanced
presentation is supported by visual illustrations of key points and key and meaningful evaluation of the Group’s performance. The Board
financial figures to facilitate the shareholders’ understanding. During is assisted by the AC in scrutinising the financial statements and
the AGM, shareholders are given the opportunity to raise questions information for disclosure to ensure accuracy, adequacy and
on all affairs of the Company. The Board, Senior Management and completeness. The Statement of Responsibility by Directors in
relevant advisers are available to provide responses and clarifications respect of the preparation of the annual audited financial statements
to the questions raised by the shareholders. The Chairman and of DRB-HICOM and DRB-HICOM Group is contained in this Annual
the GMD/Senior Management will provide the appropriate responses Report.
DRB-HICOM BERHAD
72 ANNUAL REPORT 2017
3.2 Related Party Transactions (“RPTs”) and The Board through the AC had assessed the suitability and
Recurrent Related Party Transactions independence of EY and is satisfied that there is no conflict of interest
DIRECTORS’ STATEMENT
on risk management
and internal control
In line with Paragraph 15.26(b) of the Bursa Malaysia Securities REVIEW OF RISK MANAGEMENT AND
Berhad’s Main Market Listing Requirements (“MMLR”), the Board of INTERNAL CONTROL EFFECTIVENESS
Directors of a listed issuer is required to include in its Company’s
Annual Report a statement about the state of internal control of To evaluate the effectiveness of the risk oversight and internal
the listed issuer as a Group. The Malaysian Code on Corporate control system within the Group, the Board has taken into account
Governance 2012 (“MCCG 2012”) under Principle 6 states that the the significant risks that impact the achievement of the Groups’
Board should establish a sound risk management framework and objectives and strategies.
internal control system.
The Management assists the Board in the implementation of the • Performing oversight function on sustainability initiatives
Board’s policies and procedures on risk and control by identifying, by ensuring the effective management of significant and
assessing, monitoring and reporting risks and internal control, as material economic, environment and social (EES) risks impacting
well as taking proper actions to address the risks. Management has the principal businesses of the Group;
further assured the Board that the Group’s risk management and
internal control systems are operating adequately and effectively in • Embedding risk management and sustainability capabilities
all material aspects. into all core business processes and ensuring that the culture of
the organisation reflects the risk consciousness of the Board;
DRB-HICOM BERHAD
74 ANNUAL REPORT 2017
• Ensuring sustainability is integrated within key business that appropriate actions are taken by Management based
strategies towards the collective achievement of on GIAD’s recommendations in providing solutions for
sustainability goals across the Group; improvements to the system of internal control and
ensuring that the said recommendations are implemented
• Providing a consolidated risk and assurance reporting expeditiously; and
structure to the Board to support the statement relating
to risk management and internal control in the Group’s • Maintaining a transparent relationship with the external
Annual Report; auditor and solicit professional advice to ensure reporting
standards are complied with.
• Ensuring alignment and coordination of risk, assurance and
sustainability activities across the Group; INTERNAL CONTROL
• Identifying opportunities to reap potential business benefits The key components of internal control as subscribed by the Group
through the enhancement of risk management and can be categorised as follows:
sustainability capabilities; and
1) Control Environment
• Ensuring the effective preparation of sustainability
disclosure statements and reports as prescribed by Bursa Board Committees
Malaysia Securities Berhad (“Bursa Malaysia”). The Board acknowledges that ensuring sound governance
requires effective interaction among the Board, Management,
b) Audit Committee internal and external auditors. The Board, in ensuring effective
discharge of its responsibilities, is assisted by the Board
• Ensuring the adequacy of communication and reporting of Committees, namely the Audit Committee, Nomination
annual and quarterly financial results of the Group and Remuneration Committee as well as the BRSC. Each of the
particularly on changes in accounting policies, significant Committees has clearly defined terms of reference.
adjustments arising from audits, going concern assumptions
and compliance with the Malaysian Financial Reporting Audit Committee
Standards, International Financial Reporting Standards, The Audit Committee (“AC”), comprising of one (1) Senior
Companies Act 2016 and legal requirements; Independent Non-Executive Director and two (2) Independent
Non-Executive Directors provides an oversight of the internal
• Reviewing the activities of the external auditor, mainly on and external audit processes as well as reviews the reports of
the auditor’s appointment and audit fees, auditor’s the auditor on the adequacy and integrity of the system of
independence and objectivity, scope of audit, external internal control and the financial statements of the Group.
auditor’s report to the Audit Committee and management’s
responses and key audit matters in Auditors’ Report; The AC reviews the engagement of the external auditor, their
scope, and approach in the conduct of the audit examination.
• Assessing the activities of the internal audit function, mainly The AC also reviews the activities and results of the audit
on the adequacy and achievement of the annual audit plan conducted by GIAD and where needed recommends
and the Group Internal Audit Division’s (“GIAD”) appropriate actions to strengthen control.
performance, sufficiency and competency of audit
resources; The AC meets with the external auditor at least twice a year
without the presence of the Management. The AC, consisting
• Reviewing reports issued by GIAD, including special audits of members with a wide range of knowledge, expertise and
of frauds or major internal control breakdown, and ensuring experience, has unrestricted access to internal and external
auditors and all employees within the Group.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 75
Please refer to page 79 to 82 of this Annual Report for the Audit 2) Enterprise Risk Management Assurance
Committee Report.
The Group has in place an Enterprise Risk Management
Organisational Structure & Reporting Line Framework in accordance with the principles and guidelines
There is a formal organisation structure with clear lines of outlined under the Committee of Sponsoring Organisation
reporting and responsibility to ensure proper segregation of of the Treadway Commission’s Enterprise Risk Management
duties, assignment of authority and accountability within the Integrated Framework (COSO) and the International
Group. Organisation for Standardisation’s Risk Management Principles
and Guidelines (ISO 31000:2009) to provide a consistent
Vision, Mission And Shared Values approach towards facilitating an adequate risk assurance
The Management has established vision and mission process in assessing risks by all employees within the Group.
statements, and shared values to steer and provide direction to
employees towards achieving the goals and objectives of the The Risk Management process is adopted from the ISO
Group. 31000:2009 framework as depicted below:
In this respect, the Group Risk Management Division has 3) Control Activities
established and deployed an enterprise risk management
solution to all operating companies and corporate divisions Policies And Procedures
to facilitate the effective identification, assessment, The Group has established policies and procedures to govern
quantification, monitoring, mitigating and management of key the various group processes. This would ensure consistency
risks under the Group. in practice whilst providing guidance and direction for proper
management and governance of the operations and business
The Group continuously communicates and engages with activities within the Group.
stakeholders to identify possible risk in addition to the events
and circumstances that could affect the achievement of the Among the key policies and procedures in place are Human
objectives which includes the realisation of the opportunities. Capital, Information Technology, Communication, Procurement,
A combination of qualitative and quantitative methods are used Foreign Exchange, Risk Management, Code of Ethics and
by the Management to assess and evaluate the risk identified Business Practices, Management Control and Internal Control
from 2 perspectives – risk likelihood and impact parameters. Framework, Whistle Blower, Anti-Fraud and Corporate
Management will then decide, in consultation with Group Risk Disclosure Policy. Policies and procedures are also subject to
Management Division, on the risk treatment options for periodic review, revision, validation and approval.
subsequent implementation.
The Group has also established the Limits of Authority (“LOA”)
The risk management and control systems are subject to to provide a framework of authority and accountability within
continuous review and improvement to ensure that they are the organisation. The LOA sets the limit and authorisation for
sufficiently capable of responding to changes in the risk profiles strategic, capital and operational expenditure. It is regularly
and remain aligned with the Group’s business strategy. updated and approved by the respective Boards to reflect
changing business needs in addressing operational deficiencies.
Notwithstanding the above, the Group Risk Management
Division also seeks to build a strong risk management culture Risk Management Policy
by promoting awareness, ownership and accountability of The Group has put in place a formal and structured Risk
risks. With that being said, individual risk, controls, and Management Policy developed in accordance with the principles
management action plan owners are required to provide and guidelines outlined under the Committee of Sponsoring
quarterly assurance to Management and the BRSC regarding Organisation of the Treadway Commission’s Enterprise Risk
the status of review as well as the adequacy and reasonableness Management Integrated Framework (COSO) and the
of actions put in place to mitigate key material risks faced by all International Organisation for Standardisation’s Risk
operating companies and corporate divisions under the Group. Management Principles and Guidelines (ISO 31000:2009).
The digital risk assurance sign-off module resides within a risk The policy defines the risk management governance and
management solution, namely the Q-Radar System, embedded structure, processes, accountabilities and responsibilities
within the enterprise risk management process of the Group. throughout the Group.
The assurance template within the module is accessible for
sign-off by all operating companies on a quarterly basis. Whistle Blower Policy
The Whistle Blower Policy (“Policy”) outlines the Group’s
Additional information on the Group’s Risk Management commitment towards enabling employees and other
process is provided on page 87 to 93 of the Annual Report. stakeholders to raise concerns in a responsible manner
DRB-HICOM BERHAD
ANNUAL REPORT 2017 77
The Policy and its disclosure procedure are accessible to the Please refer to page 82 to 83 of this Annual Report on the
public for reference on the Company’s website at summary of audit works performed by GIAD.
www.drb-hicom.com. Complaints or reports under this Policy
can also be made through the Whistle Blower Hotline. Moreover, members of the Management under the various
Corporate Head Office functions, such as procurement
Business Planning And Budgetary and information technology, also undertake periodical review
The Group manages performance of the operating units, of the compliance and adequacy of the control systems as well
within which business strategies, planning and budgetary as procedures of the Group’s companies and operating units.
exercises are established annually and actual performance is
monitored and assessed periodically against set targets. Performance Management
Continuous education, training and development programmes
4) Information And Communication are emphasised in order to nurture quality and competent
employees.
Pertinent information such as the Group’s achievements,
changes with regard to corporate and organisational structure Employees’ performances are measured according to the set
as well as policies and procedures are identified, captured, and of key performance indicators (KPI) aligned to their functions as
communicated in a proper and timely manner. This would assigned to them and which they are expected to accomplish.
enable employees to focus and perform their responsibilities
effectively. ASSURANCE TO THE BOARD
In addition, all Heads of Business Sectors, Operating Units and The Statement on Risk Management and Internal Control has been
Corporate Divisions participate in business dialogue prepared in compliance with the MMLR and the Statement on Risk
programmes with Senior Management of the Group to discuss Management and Internal Control – Guidance for Directors of Listed
strategies and challenges faced towards achieving the business Issuer 2012. In making the above assurance, the Group Managing
goals and objectives. Director and the Group Director, Financial Services acknowledged
that the risk management and internal control systems are operating
adequately and effectively in all material aspects based on the risk
management and internal control systems of the Group.
DRB-HICOM BERHAD
78 ANNUAL REPORT 2017
For the financial year under review and up to date of the approval
of this Statement on Risk Management and Internal Control, after
taking into consideration the assurance from the Group Managing
Director and Group Director, Financial Services, the Board is of the
opinion that the system of internal control and risk management
processes are adequate and sound to provide reasonable assurance
in safeguarding shareholders’ investments, the Group’s assets
and other stakeholders’ interests as well as in addressing key risks
impacting the business operations of DRB-HICOM Berhad. There
was no major internal control weakness identified that may result in
any material loss or uncertainty that would require disclosure in this
Annual Report.
AUDIT COMMITTEE
report
The Board of Directors (“Board”) of DRB-HICOM Berhad is pleased During the AC Meetings, the Management of the Company was
to present the Audit Committee Report for the financial year ended invited to brief the AC on the Group’s financial performance and
31 March 2017. relevant corporate matters as well as to address any queries raised by
the AC. The Management of the Group Internal Audit Division (“GIAD”)
1. COMPOSITION AND ATTENDANCE AT MEETINGS attended all AC meetings and presented the internal audit reports to
the AC. Other than the results and reports of internal audits, GIAD
1.1 Composition also presented the summary of audit activities, internal audit plan as
well as audit staff strength. The external auditor was also invited to
The composition of the Audit Committee (“AC”) members during the attend the AC meetings to present the audit scope and plan as well as
financial year (“FY”) under review up to the date of this report is as the Auditors’ Report on the audited financial statements.
follows:-
All issues discussed and deliberated during the AC meetings were
recorded in the minutes of each meeting by the Company Secretary
who is also the secretary to the AC. Any matters of significant concern
raised by the internal and external auditors were duly conveyed by
the AC to the Board.
(a) The AC deliberated with the external auditor the results of the
(b) The AC reviewed the annual audited financial statements of
audit of the annual audited financial statements for the financial
DRB-HICOM Group and Company for the FY2015/16 together
year ended 31 March 2016 and the Report to the Audit
with the Statement of Directors’ Responsibility and took note of
Committee as well as the management responses at its meeting
the Report to Audit Committee from the external auditor,
held on 29 June 2016.
Messrs. Ernst & Young at its meeting held on 29 June 2016.
(b) The AC reviewed and approved the Annual Audit Plan for
(c) The unaudited quarterly financial results for the first quarter,
financial year ended 31 March 2017 with the external auditor
second and third quarter for the FY2016/17 were reviewed at
inclusive of the terms of engagement and scope of work for the
the AC meetings held on 29 August 2016, 28 November 2016
statutory audit at its meeting held on 27 February 2017.
and 27 February 2017 respectively.
During the meeting, the external auditor affirmed that Messrs.
Ernst & Young and all members of its engagement team have
This includes the review on the announcements of the financial
maintained their independence in accordance with the
results to Bursa Malaysia prior to recommending to the Board for
provisions of the By-Laws on Professional Ethics, Conduct and
approval. The review was conducted to ensure that the financial
Practice of the MIA.
reporting and disclosure were in compliance with:
The total staff strength in GIAD as at 31 March 2017 stood at 40 staff GIAD adopts a risk-based approach as part of its audit planning and
which includes the staff from the internal audit function of PROTON execution focusing on significant identified risks and effectiveness of
Holdings Berhad as summarised below:- the controls in mitigating the risks. In performing the audit
engagements, GIAD is guided by the Institute of Internal Auditors’
International Professional Practices Framework (IPPF) which
includes the Definition of Internal Auditing, the Code of Ethics, and the
International Standards for the Professional Practice of Internal
Auditing.
• Procurement;
• Inventory Management;
• Business Operations;
GIAD also invested in various training programmes to maintain • Contract Management;
and enhance the desired competency level of the Group’s internal • Project Management;
auditors. The training programme, comprising in-house and • Human Resource Management;
externally sourced training, focuses on functional and developmental • Financial Management;
needs of the internal auditors. • Asset Management;
• Management Information System; and
• Safety, Health & Security.
All findings from the internal audit reviews were reported to the AC,
Senior Management and the relevant Management of the operating
units.
ADDITIONAL COMPLIANCE
information
(Pursuant to the Main Market Listing Requirements of
Bursa Malaysia Securities Berhad (“MMLR”))
UTILISATION OF PROCEEDS
There were no proceeds raised by the Company from any corporate proposal during the financial year ended 31 March 2017.
The Company did not seek for the shareholders’ mandate on the RRPTs of the Group at the last Annual General Meeting.
Save as disclosed below, none of the RRPTs entered into by the Group during the financial year ended 31 March 2017 exceeded the thresholds
prescribed under Chapter 10.09 of the MMLR which required announcement to be made to Bursa Malaysia Securities Berhad (“Bursa Malaysia”)
and/or shareholders’ approval.
The Company had on the following dates released announcements to Bursa Malaysia on the RRPTs entered between Motosikal Dan Enjin
Nasional Sdn. Bhd. (“MODENAS”), a 81% owned subsidiary of the Company and Kawasaki Heavy Industries Ltd. (“KHI”), a 19% shareholder of
MODENAS, as the aggregate RRPTs as shown below had exceeded the 1% threshold prescribed under the MMLR:
MATERIAL CONTRACTS INVOLVING YBhg Brig. Gen. (K) Tan Sri Dato’ Sri (Dr) Haji Mohd Khamil
bin Jamil (“TSMKJ”), the Non-Independent Non-Executive
DIRECTORS’ AND MAJOR SHAREHOLDERS’
Chairman of the Company holds 10% equity interest in ESSB
INTEREST is a person connected to TSSM and deemed interested in the
Proposed Land Status Swap.
The particulars of material contracts entered into between the
Company and its subsidiaries involving the Directors’ and major (ii) A share sale agreement between HICOM Berhad (“HB”) and
shareholders’ interest which are still subsisting as at 31 March 2017 MRCB Engineering Sdn. Bhd. (“MESB”) dated 17 February 2017
or, if not then subsisting, entered into since the end of the previous for the acquisition of 510,000 ordinary shares in Dekad Kaliber
financial year are as follows: Sdn. Bhd. (“DKSB”) representing 51% equity interest in DKSB
from MESB (“Sale Shares”) for a total cash consideration of
(i) Land Status Swap Agreement (“Agreement”) between Rebak RM7 million (“DKSB Acquisition”).
Island Marina Berhad (“Rebak”) and Northern Gateway Free
The DKSB Acquisition was completed on 17 February 2017.
Zone Sdn. Bhd. (“NGFZ”) dated 21 December 2011 (“Proposed
Land Status Swap”) for a cash consideration of RM76 million.
Save as disclosed below, none of the other directors, major
shareholders and/or persons connected with a director or
The parties agreed to change the designation of 333 acres
major shareholder of the Company has any interest, direct or
of freehold land owned by Rebak from Malay Reserve (“MR”)
indirect in DKSB Acquisition.
to non-MR by swapping with the non-MR status of 350 acres
of freehold land owned by NGFZ subject to the conditions As at 27 January 2017, Employees Provident Fund (“EPF”)
imposed by Kedah State Government. holds 34% equity interest in Malaysian Resources Corporation
Berhad (“MRCB”), the holding company of MESB. As at
Save as disclosed below, none of the directors, major
6 February 2017, EPF owns 5.27% equity interest in the
shareholders of Rebak and/or the Company and/or persons
Company. As such, EPF is deemed interested in the DKSB
connected with them has any interest, direct or indirect, in the
Acquisition.
Proposed Land Status Swap.
Encik Ahmed Kamil P M Mustafa Kamal (“AKMK”) holds 1
preference share in NGFZ and is a director in Northern Gateway
AUDIT AND NON-AUDIT FEES
Sdn. Bhd. (“NGSB”) and Benua Bayu Sdn. Bhd. (“BBSB”) which
are the holding company and intermediate holding company (i) The amount of audit fees paid or payable to the external
of NGFZ respectively. AKMK was a shareholder in HICOM auditors, Messrs Ernst & Young (“EY”), and their affiliated
Power Sdn. Bhd. (“HPSB”) prior to the completion of acquisition companies for the services rendered to the Group and the
of HPSB by the Company on 30 October 2008. AKMK then held Company for the financial year ended 31 March 2017
1 ordinary share of RM1.00 each in HPSB in trust for YBhg Tan amounted to RM5.06 million and RM0.30 million respectively.
Sri Dato’ Seri Syed Mokhtar Shah Bin Syed Noh (“TSSM”), being
the other shareholder in HPSB. As such, AKMK is deemed a (ii) The amount of non-audit fees paid or payable to the external
person connected to TSSM. auditors, EY, and their affiliated companies for the services
rendered to the Group and the Company for the financial
TSSM, an indirect major shareholder of the Company through
year ended 31 March 2017 amounted to RM2.94 million and
his major shareholding in Etika Strategi Sdn. Bhd. (“ESSB”), the
RM0.92 million respectively.
holding company, was deemed interested in the Proposed
Land Status Swap.
DRB-HICOM BERHAD
86 ANNUAL REPORT 2017
STATEMENT OF
directors’
responsibility
in respect of the preparation of the Financial
Statements for the financial year ended 31 March 2017
The Directors are required by the Companies Act 2016 (“the Act”) to ensure that the financial statements prepared for each financial
year give a true and fair view of the financial position of the Group and of the Company as at the end of the financial year and of the
financial performance and cash flows of the Group and of the Company for the year then ended. As required by the Act and the Listing
Requirements of Bursa Malaysia Securities Berhad, the financial statements have been prepared in accordance with Financial Reporting
Standards in Malaysia and the provisions of the Act.
The Directors consider that in preparing the financial statements for the financial year ended 31 March 2017 set out on pages 168 to 350,
the Group has used appropriate accounting policies, consistently applied and supported by reasonable and prudent judgements and
estimates and ensured that all applicable approved accounting standards have been followed.
The Directors have ensured that the accounting records kept by the Group and the Company have been properly kept in accordance with
the provisions of the Act, which disclose with reasonable accuracy the financial position of the Group and of the Company.
This Statement is made on behalf of the Board in accordance with a resolution of the Directors dated 10 July 2017.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 87
RISK
management
OVERVIEW
Today’s organisations are faced with a myriad of challenges that presents increased uncertainties to their business environment on a global
scale. These uncertainties create risks that significantly impacts business performance and growth. As such, the impetus for organisations to
subscribe to robust and resilient risk management practices becomes even more pertinent to manage the negative repercussions brought on
by these uncertainties. In meeting these challenges, DRB-HICOM Berhad continues to develop and institute new improvement initiatives in
its risk management methodologies to drive and embed a holistic risk culture and value creation into the mind-set of business entities, thus
ensuring the sustained achievement of its business and strategic objectives. The Board of DRB-HICOM Berhad remains committed to ensure
the continual effectiveness in implementing risk management and internal control systems across the Group to achieve operational excellence
without compromise to its core values. In realising this endeavour, the Group continues to adopt an enterprise-wide risk management process
comprising the following key components:
DRB-HICOM BERHAD
88 ANNUAL REPORT 2017
In advocating good risk governance towards optimising long • Remaining flexible to accommodate the changing risk
term stakeholder returns, the Group continues to enhance its management needs of the organisation while maintaining
oversight capabilities in assessing uncertainties impacting the control of the overall risk position;
business environment, from changes in regulatory and financial • Detailing the approved methods for risk assessment; and
requirements, to technological advancements and data security • Providing a system to accommodate the central accumulation
DEFENCE and shifts in the organisation’s implicit risk exposure and appetite.
In addition, Group Risk Management Department provide assistance
towards improving the awareness of risk management practices as
In providing assurance on the effective implementation of the
well as to inculcate positive risk culture within each of the prescribed
Enterprise Risk Management program, the Group adopts the “Three
entities across the Group.
Lines of Defence” model based on the recommendation of the
European Confederation of Institutes of Internal Auditing (ECIIA)
3rd Line of Defence: Group Internal Audit Division
to safeguard the business interest of the Group against adverse
Group Internal Audit Division is responsible in providing independent
impacts of material risks as illustrated below:
assurance through a systematic approach to evaluate and improve
the effectiveness of risk management, control and governance
processes throughout the entire organisation
Business and Strategic Risks Compliance checks and audits are carried out periodically to enforce
Business and strategic risks arises from uncertainties impacting the the implementation of the Group’s Code of Ethics & Conduct and
execution of strategic initiatives deployed based on long and short Whistle Blowing Policy to curb incidences of fraud across all business
term policy decisions. These decisions are made in accordance with sectors and operating units.
the business direction of the Group in enhancing performance and
growth within the domestic, regional and global markets. To further offset risks to the Group’s reputation, ongoing enhancement
towards the brand and image of the Group is performed through
In this respect, the Group maintains its continued vigilance over various Corporate Responsibility (CR) programmes organised by
evolving political, social, business and economic landscapes to Group Strategic Communications Division. Details of these initiatives
ensure that changes are promptly identified, assessed and managed are noted on page 157 in the Annual Report.
to preserve the uninterrupted implementation of those strategies
associated with the Group’s business objectives. Notwithstanding the above, risk assessment is similarly carried
out for new business initiatives undertaken by the Group. The
assessment report, comprising identified risks and mitigation plans,
Industry Risks
forms part of the investment proposal paper reported to the Board
Industry risks arise from uncertainties impacting industry
of Management, chaired by the Group Managing Director, for
performance caused by the imposition of revised fiscal and trade
deliberation and approval.
policies. With the Group’s core business concentrated on the
automotive sector, policy changes will bring about significant impact
to the Group’s overall performance and operational sustainability Financial Risks
in the form of increased competition, advancements in innovation Uncertainties arising from FOREX and interest rate volatilities cannot
and technology, shifts in customer preference and volatility in be underestimated. In dealing with this risk, DRB-HICOM Berhad
commodities and currency pricing. continues to implement its Group Foreign Exchange (FOREX) Policy
which stipulates distinct measures in utilising appropriate hedging
In mitigating these risks, the Group has undertaken various instruments to assess manage and minimise foreign currency losses.
initiatives, comprising amongst others, securing new business The Policy is consistently reviewed and updated to reflect changing
opportunities with global OEMs, embarking on non-automotive and financial requirements and it is deployed to all business sectors and
aerospace business diversification programmes, securing additional operating units within the Group for effective implementation.
defence contracts as well as growing the e-fulfilment, concession
and education businesses. Notwithstanding the above, the Group is equally mindful of changes
in interest rate movements that will adversely affect revenue and
Reputation Risks profit contribution, particularly from the automotive and property
The Group acknowledges the impact of reputation risks towards markets. In this respect, appropriate detection mechanisms
eroding image and brand visibility. Reputational damage caused by have been put in place to monitor and alert Management of such
negative media and publicity over the Group’s business practices, changes so that prompt measures can be initiated and acted upon
conduct or financial condition will adversely impair stakeholders expediently.
confidence, resulting in costly litigation and decline in customer
base, business and revenue. Funding represents another key risk to the Group due to the
extensive amount of capital required to finance new acquisitions
The Group manages its reputation risks through regular engagement and to mobilise existing and new projects. Concern in this area rests
and communication sessions with key stakeholders to disseminate primarily on our ability to secure the requisite financing due to the
relevant information regarding the conduct of the Group’s activities. imposition of single customer limit, breach of funding covenants set
by financial institutions and down grade of ratings by credit agencies
arising from our increased financial commitments to the banks.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 91
The Group manages its funding risks by maintaining an optimal Project & Investment Risks
capital structure through detailed monitoring of financing and Risks relating to projects and investments for new business initiatives
cashflow plans established by business sectors and operating units. are critically identified, assessed, analysed and incorporated into
proposal papers for deliberation by the Management of DRB-HICOM
Constant engagement is carried out between Group Financial Berhad prior to approval.
Services & Treasury Division, together with the business units and
financial institutions to track the status of financing, which comprise, These endeavours are critical in ensuring proper and adequate
amongst others, the issuance of corporate medium term notes and safeguards are in place to address and mitigate potential risks that
bonds, as well as drawdowns on syndicated loans and club deals. may derail the eventual execution and realisation of investment
objectives. The mitigation plans to manage the identified risks are
The Group constantly seeks out new funding arrangements to then incorporated into the delivery value chain and closely monitored
further boost its financial capabilities towards driving new project throughout the project or investment life-cycle.
initiatives in line with its long-term strategic business plan.
The Group manages its Project & Investment risk through the risk
Organisational Risks assessment carried out for new business initiatives undertaken
The Group is acutely aware of risks impacting its human capital by the Group. The assessment report, comprising identified risks
management programmes. These risks, comprising attrition of and mitigation plans, forms part of the investment proposal
talents, competencies and capabilities concerns, skills shortages, paper reported to the Board of Management (formerly known as
fragmented succession planning to mission and operational Management Committee), chaired by the Group Managing Director,
critical positions and less than optimal consequence management, for deliberation and approval.
Risk Initiatives
The Group continues to expand and enhance on its risk management
initiatives through risk review and validation sessions held across
all Business Sectors, Operating Units and Corporate Divisions
on a quarterly basis. These sessions are aimed at assessing the
effectiveness and relevance of controls and management action
plans implemented to mitigate the occurrence and severity of
documented key risks. Action plans for all key risks are further
assessed to ensure the timeliness of execution and are kept within
resource limits.
Risk Appetite
The risk appetite defines the value and type of risks that the Group
is prepared to accept in pursuit of its strategic business objectives. It
stipulates the level of tolerance and limits established to govern and
manage the Group’s risk taking activities.
Key objectives to the risk clustering approach are:
The Group’s risk appetite serves as a benchmark for all Business • Providing a clear and direct linkage between risk and reward
Sectors, Operating Units and Corporate Divisions to develop risk measurement by reconciling business objectives against
tolerances and limits in accordance to their specific business/ identified key risks;
operational requirements and objectives. Monitoring of key risk • Prioritising key risks to be managed through data analytics that
exposures are then performed through the analysis of the risk provides quantified exposure values;
tolerances set against monthly business and performance trends • Monitoring and assessing the adequacy, timeliness and
at the respective Business Sectors, Operating Units and Corporate effectiveness of action plans in managing pertinent key business
Divisions. risks;
• Anticipating future events/emerging risks via trend analysis;
• Performing statistical data analysis for better-informed decision
Business Risk Clusters
making processes;
DRB-HICOM Group Risk Management Department continuously
• Managing risks and assessing the relevancy of the risk
introduces new and effective approaches in strengthening and
appetites in tandem with changes to business environment and
enhancing the risk intelligence process through the establishment
regulations;
of business risk clusters. The risk clustering methodology provides
• Nurturing and instilling concerted efforts in managing risks
a more holistic perspective towards providing a spectrum of key risk
within specific business sectors; and
areas to be managed as illustrated in Diagram 1.0.
• Fostering proactive risk management and risk awareness across
the Group.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 93
The Group continues to enhance its risk management capabilities across all Business Sectors, Operating Units and Corporate Divisions. Risk
review and validation sessions, awareness programmes and discussion forums are facilitated and conducted by Group Risk Management
Department on a quarterly basis to ensure continued effectiveness in implementation of the risk management processes.
The Group’s Enterprise Risk Management Process provides for regular review and reporting. Such reports include an assessment on the
significance of existing and emerging key risks impacting the Group’s businesses as well as an evaluation of the effectiveness of controls and
action plans put in place for additional controls. The key elements of the reporting process are shown in the below graph:
MOVING FORWARD
DRB-HICOM Berhad is committed in implementing key initiatives towards embedding strategic risk management thinking as a business
culture across all Business Sectors, Operating Units and Corporate Divisions within the Group.
DRB-HICOM BERHAD
94 ANNUAL REPORT 2017
DRB-HICOM BERHAD
ANNUAL REPORT 2017 95
DRB-HICOM BERHAD
96 ANNUAL REPORT 2017
CHAIRMAN’S
foreword
Our financial year ended 31 March 2017 was without doubt challenging, given a softening of the local
economy in reflection of continued global uncertainties. Malaysia’s gross development product (“GDP”)
for the calendar year 2016 came in at 4.2%, lower than the 5.0% achieved in 2015. Although still relatively
robust compared to the global GDP of 3.4%, it was one of the lowest we have seen in the country in
recent years. This environment impacted the performance of domestic businesses, DRB-HICOM Berhad
(“DRB-HICOM” or “the Group”) notwithstanding.
Despite the challenging backdrop, the Group managed to achieve encouraging results, reducing our
pre-tax loss to RM222.18 million, against a loss of RM822.13 million in the previous financial year. Credit
for our results goes to the concerted efforts by all businesses within the Group to enhance efficiencies and
reduce costs, complemented by Group-wide strategies in terms of business focus and direction.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 97
Greater Business Diversification currently work with approximately 500,000 vendors, suppliers,
contractors and dealers, and we are equally committed to their
We have continued to place emphasis on building our Services growth as we are to our own sustainability.
our logistics businesses into Pos Malaysia Berhad (“Pos Malaysia”), management, but every one of the estimated 60,000 individuals
resulting in an increased equity interest in the company from 32.21% who make up DRB-HICOM. We are pleased to see the average
to 53.5%, and establishing Pos Malaysia as a subsidiary company age of our management decrease over the years, as it reflects an
of DRB-HICOM. This not only allows us to consolidate the revenue increasingly dynamic and energetic leadership who are more in tune
and profit of Pos Malaysia, but also to centre our efforts to catalyse with the needs and expectations of a market driven by millennials.
the e-Commerce fulfilment and logistics services development on At the same time, we are heartened by a noticeably enhanced level
the national postal services provider so as to be able to provide of engagement between management and employees, which goes
end-to-end fulfilment and logistics services for e-Commerce a long way towards forging a greater sense of unity and maintaining
marketplace clients in Malaysia and the region. high levels of motivation in a Group as large as ours.
Logistics and e-Commerce hold great potential for further In order to bring out the best in our people, we place emphasis on
growth, and we intend to enhance our capabilities in this sector. their professional development. This, in turn, supports our own
In the process, we would also be supporting the Government’s succession plans, enabling us to nurture a steady pipeline of talent
agenda of transforming Malaysia into a regional logistics hub. to fill key positions within the Group. I am also pleased to share that
about 30% of these positions are taken up by women; underlining
Focus on logistics is integral to the Group’s new 5-Year Plan which our belief in gender equality.
We have also been commended by the regulators for posting have provided by nurturing a healthy environment for economic
the minutes of our meetings on our corporate website, along development in the country.
with other information that is pertinent to our shareholders and
other stakeholders such as our quarterly and annual financial In addition, I would like to express my gratitude to colleagues
results, annual reports, media releases and Bursa Malaysia on the Board for their commitment and wise counsel in guiding
announcements. DRB-HICOM, especially during these challenging times. A
note of special thanks goes to YBhg Tan Sri Marzuki bin Mohd
The emphasis we place on corporate governance is driven not Noor, YBhg Datuk Haji Abdul Rahman bin Mohd Ramli, YBhg
merely to satisfy regulatory requirements, but more because we Dato’ Abdul Rahman bin Ahmad and Mr Ong Ie Chong for their
believe strongly it is the right way to run our business. Quality, contributions during their tenures on the Board. I would also like
transparency and integrity – which represent some of our to extend a warm welcome to YBhg Datuk Idris bin Abdullah @
core corporate values – have served to enrich our stakeholder Das Murthy, who was appointed as an Independent and
relationships over the years. Non-Executive Director on 1 January 2017 and YBhg Dato’ Siti
Fatimah binti Daud, who was appointed as a Non-Independent
Non-Executive Director on 1 April 2016.
Acknowledgements
On behalf of the Board, I would like to express our heartfelt
I would like to acknowledge our business partners for the
appreciation to the management for their perspicuity in shaping the
commitment they have shown in working with us and sharing
right strategies to overcome the current economic downturn, and
our vision to deliver the best to our customers. To our vendors,
position the Group strategically to venture into fast-growing sectors
suppliers, contractors and dealers, thank you for supporting us by
to secure our sustainability. Finally, together with management, we
delivering the goods and services that we require. To our financiers
would like to thank all our employees for their hard work without
and shareholders, we are indebted to your investments and will
which we would not be where we are today – one of the biggest
continue to enhance our business to honour our commitments
and most diversified corporations in Malaysia, a time-tested
to you. We would also like to express our appreciation to the
organisation that will continue in our quest to contribute to the
Government and its regulatory bodies for the support they
development of the nation, and its people.
DRB-HICOM BERHAD
100 ANNUAL REPORT 2017
MANAGEMENT DISCUSSION
and analysis
Within this scenario, we were fortunate that the Group has been Within the Automotive division itself, there is scope to diversify
actively diversifying our business over the years. While our Automotive the production lines of our manufacturing & engineering (“M&E”)
division, particularly the retail segment, was impacted by the companies into non-automotive components for the aerospace,
economic environment, there were still pockets of growth within our electronics and industrial sectors. Most of our M&E companies have
extensive Automotive and Manufacturing & Engineering value chain, already initiated this process, which will be intensified in the
such as in Honda Malaysia and Composites Technology Research coming years. We are also building our leasing business by targeting
Malaysia Sdn. Bhd. (“CTRM”) which manufactures components more corporate and Government-based clients.
for the aerospace and aviation industries. More encouragingly,
companies within our Services sector too, performed well. An extremely positive development during the year was finalising a
Foreign Strategic Partner (“FSP”) for PROTON Holdings Berhad
We felt validated in our strategy of building our logistics portfolio (“PROTON”). After an intense period of analysing and negotiating with
and rationalising the companies under Pos Malaysia, given their potential partners, we were able to come to a mutually beneficial
results. This year, we increased our equity holding in Pos Malaysia agreement with Zhejiang Geely Holding Group Co., Ltd. (“Geely
from 32.2% to 53.5%, thus provided greater control over the national Holding”) for the Chinese car group to subscribe for 49.9% equity in
postal services provider which we intend to transform into a regional PROTON. The deal will enable PROTON to tap into Geely Holding’s
logistics supply chain solution provider. Globally, the logistics market, vast range of platforms and powertrains, and access its markets for
valued at USD8.2 billion in 2015, is expected to almost double to export purposes. Meanwhile, the FSP will leverage PROTON’s
USD15.5 billion by 2023, growing at a CAGR of 7.5% from 2015 to state-of-the-art plant to build a presence in the right-hand drive
2024. In Malaysia itself, the transportation and storage sub-sector market of the Southeast Asian market.
alone is expected to contribute to 4.3% (RM50.8 billion) of our gross
domestic product (“GDP”) by 2020 from 3.6% currently. The deal also marked the Group’s exit from the sports car segment
as it included the disposal of 100% equity in Lotus. This was to allow
In the financial year under review, we have seen the beginnings of PROTON to focus on strengthening our forte in sales and distribution
what we can expect to be an explosion in e-Commerce. For the first of passenger cars locally and internationally, which we believe marks
time ever in Pos Malaysia’s history, the courier business surpassed a turning point in PROTON’s transformation and sets the national car
the traditional mail business in terms of revenue. There is, without manufacturer on the right path towards both domestic and export
doubt, great potential for growth in logistics and we intend to venture growth.
more extensively into this market through Pos Malaysia. We felt
more vindicated as our instincts and belief in Pos Malaysia’s business Partnerships such as that with Geely Holding continue to be
have been proven right by the financial fraternity evidenced by the important to DRB-HICOM. We are pleased to share that during the
upsurge of Pos Malaysia share price from RM2.78 at the time of year we forged a number of new strategic partnerships that will
the announcement of the exercise to inject logistics assets into Pos go a long way towards further strengthening the operations of our
Malaysia, to now hovering consistently at above the RM5.00 mark. subsidiary companies, and hence the Group’s performance.
Within the waste management segment, Alam Flora Sdn. Bhd. Motosikal dan Enjin Nasional Sdn. Bhd. (“MODENAS”), for example,
(“Alam Flora”) is gaining ground by expanding its concession has entered into collaboration with Taiwan-based KYMCO resulting
operations. Discussions with relevant authorities are at an in the development of two new scooter models and exclusive
advanced stage, and we hope to be able to announce some distributorship for KYMCO brands in Malaysia. It had also
positive news in this regard in the near future. Meanwhile the collaborated with BAJAJ Auto Ltd. (“BAL”) to penetrate the street
non-concession arm, DRB-HICOM Environmental Services Sdn. Bhd. bike segment, through the introduction of three new bikes into the
(“DHES”), continued to expand through the provision of integrated market. We believe in enhancing MODENAS’ product lines and
facilities management (“IFM”) and ‘green’ services such as recycling. offering greater choice to Malaysian consumers.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 103
Pos Malaysia, too, entered into a number of partnerships to further f. Reduce focus or exit from unprofitable lines of business;
and
build its logistics capabilities. This year, it has signed an agreement
with Tigers Global Logistics Sdn. Bhd. on leveraging its end-to-end g. Right-size businesses and resources.
e-fulfilment solutions for cross-border e-Commerce activities. In
addition, it has entered into an arrangement with Lazada The process of business rationalisation has begun, with the
(Malaysia) Sdn. Bhd. to establish an e-Commerce Regional disposal of three companies, with one deregistered while several
Distribution Centre in Sepang, Selangor. others have been merged for greater operational synergies.
GROUP STRATEGY Based on this plan, we have outlined key targets for FY2017/18 and
the coming years.
In the financial year under review, the Group embarked on a new
five-year plan that will guide our growth till FY2020/21. The plan is FY2017/18 Next Financial Years
based on seven key strategies, namely:
• Execute the PROTON • Enhance PROTON’s market
a. Defend our market position by strengthening our core Turnaround Plan. position post-Turnaround
competencies and developing a stronger competitive Plan.
advantage; • Defend market position by
strengthening core • Establish mature in-house
b. Establish entry into future growth segments at optimal competencies and R&D and product
investment levels; stronger competitive development capabilities
advantage. in Automotive.
c. Identify and pursue Strategic Partnerships that can
provide access to products/services, markets, technologies • Achieve delivery • Expand in Concessions
and expertise; excellence in existing and secure greater scope
contracts and in Government contracts.
d. Ensure successful execution with high quality, concessions.
cost-effective and quick delivery; • Grow in logistics,
• Build fundamentals in e-Commerce
e. Rationalise and consolidate organisational structures high growth / high and digital offerings /
for effective cost management; potential industries disruptors.
such as logistics,
aerospace, aviation, • Grow in aerospace,
automotive leasing, aviation and defence
education. technologies.
• Undertake portfolio • Expansion presence
rationalisation and reduce regionally and globally.
presence in automotive
retail, construction.
Alam Flora continues to provide exemplary services to residents of its (vi) Strategic human capital framework and talent management
concessession areas plans.
DRB-HICOM BERHAD
104 ANNUAL REPORT 2017
FINANCIAL REVIEW The Property, Asset and Construction (“PAC”) division achieved a 45.4%
increase in revenue from RM293.8 million in FY2015/16 to RM427.3
Despite the tough operating environment, DRB-HICOM maintained million, mainly from the sale of Corwin Holding, Neraca Prisma and
our revenue at RM12.1 billion, which was only marginally less than Puncak Permai and construction projects being undertaken by our
the RM12.2 billion achieved in the previous financial year. Significant new concession companies, Northern Gateway Infrastructure and
contributors to our revenue were Pos Malaysia, which became a Media City Development. Profit came in at RM506.9 million, due to
subsidiary during the year under review, and the disposal of our disposal of Corwin Holding.
At the same time, the Group greatly reduced our pre-tax loss for
the year ended 31 March 2017 to RM222.2 million, compared to
RM822.1 million the previous year. Profit was boosted by a number
of factors, namely the gain on disposal of Corwin Holding; one-off
exceptional loss on the re-measurement of previously held equity
interest in Pos Malaysia; lower losses at PROTON and a higher
contribution from the Services division.
Liquidity Management
The Group has taken appropriate and reasonable measures in
ensuring the liquidity exposure is being managed efficiently and
economically. For the previous financial year, the exposure on
currency fluctuations has been minimised by timely hedging in line
with the DRB-HICOM Group Foreign Exchange Policy. The planned OPERATIONAL REVIEW
capital expenditure (“Capex”) that supports the strategic initiatives
will be funded via internal and external sources of funding. Automotive Sector
appetite. MODENAS, for example, has launched new models This was sealed with the signing of a Heads of Agreement
from its new partnership with leading Taiwanese and the Definitive Agreement with Geely Holdings on 24 May
motorcycle manufacturer, KYMCO; and is collaborating with 2017 and 23 June 2017 respectively, which will see the Chinese
Indian manufacturer BAL. carmaker subscribing for 49.9% equity in PROTON.
• Rationalisation of the division by focusing on growth sectors Despite the challenges, we are happy to note that in FY2017
such as aerospace, and on the manufacture of industrial and PROTON initiated a bold move to strengthen its presence
other components. The aviation industry in the region continues despite the industry slowdown by following through diligently
to grow, driven in part by increasing popularity of low-cost its turnaround plan. PROTON launched four new models,
carriers. This is placing demand for more aircrafts, hence namely the Perdana, Persona, Saga and Ertiga, as well as the
also for components, creating business opportunities for CTRM. roll-out of ‘Customer-First’ initiatives and implementation of
an operational turnaround, which helped elevate PROTON
• Better cost management through the introduction of shared brands, garner better customer confidence in PROTON cars
services for automotive retail companies as a cost reduction and increase awareness of safety features in PROTON cars.
initiative; minimal stock holding, internal reorganisation and
tender reviews; and concerted efforts to create lean and Amongst the more notable ‘Customer-First’ programmes were
efficient operations Group-wide. ‘MyProton’ mobile application software, 27 sales and services
outlets which are open seven days a week, the PROTON-PETRONAS
Building Key Automotive Brands co-branded engine oil, price reduction of PROTON genuine
Honda, which enjoys excellent brand value in the domestic spare parts and active social media engagement. Concurrently,
market – it is currently the second most popular brand in upstream operational improvement activities have been
Malaysia – continued to perform well, seeing a 4% increase implemented through a collaboration programme with Malaysia
in number of units sold. During the year, it launched the Automotive Institute (“MAI”).
All-New Civic and a facelifted Accord both of which performed
well, contributing to an increase in market share from 14.2% in PROTON also made headway in its export programme by sending
2015 to 15.8%. the first batch of left-hand drive Proton Preve to Chile; launching
of the Proton Iriz, Proton Persona and Proton Saga in Brunei;
In the motorcycle sector, MODENAS launched two models in followed by the Proton Iriz in Indonesia.
collaboration with KYMCO – MODENAS Karisma (125cc) and
MODENAS Elegan (250cc). It was also appointed as a distributor of
KYMCO Downtown 250i and plans to expand into their 300cc
and 400cc models in the near future.
Response for these new launches has been good, and we are now
having to ramp up the pipeline of supply to meet an increasing
backlog of orders.
Turnaround of PROTON
PROTON embarked on a turnaround programme in
2016 to develop the right products for the right market
to arrest its sales decline. The programme encompasses
entering into an equity partnership with Foreign Strategic
Partner (“FSP”) with a renowned automobile company.
MODENAS is charting new growth areas through collaborations with key global
brands such as KYMCO and BAJAJ
DRB-HICOM BERHAD
106 ANNUAL REPORT 2017
Our interest in the aviation logistics and aviation services continue to grow and contribute to our performance
portfolio. The business was previously managed by two companies - Cash Management
DRB-HICOM Leasing Sdn. Bhd. (“DLSB”) which held the brand
- Ensure sufficient cash to sustain our business. Added focus
MyLease; and DRB-HICOM EZ-DRIVE Sdn. Bhd. (“EZ-DRIVE”) which
on the management of account receivables and payables to
held the AVIS franchise. To consolidate the business, we undertook ensure healthy cash flow.
an exercise that saw EZ-DRIVE acquiring 100% equity in DLSB. The
rationalisation was completed on 31 March 2017. Going Forward
Although we expect the automotive sector in general in 2017 to
Diversification of Manufacturing be flat, we will be launching a number of new models to leverage
Supporting further diversification, companies that make up our existing pockets of demand, especially for motorcycles. Sales
Manufacturing and Engineering sector have started broadening their in the first quarter of the calendar year has been better than the
production lines to include metallic parts for the aerospace industry, previous year, with a 29% increase in volume. At the same time,
as well as furniture components for steelcase by Oriental Summit we will continue with our rationalisation programme, and focus on
Industries Sdn. Bhd. (“OSI”), air and water filters components by PHN building certain brands with potential while letting go of others.
Industry Sdn. Bhd. (“PHN”), etc. We will also forge ahead with efforts to diversify the manufacturing
sector to cater for new growth areas.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 107
Services Sector and East Malaysia. Plans are in the pipeline to extend the service
regionally, and to include destinations such as Saigon, Macau and
The Services division – comprising our logistics businesses Manila into the network.
(Pos Malaysia and DHAS), concessionaires (PUSPAKOM and Alam
Flora) and Others (Bank Muamalat and HICOM University College Digitalisation of vehicle inspection
Sdn. Bhd.) – provides a good balance to the Automotive and Property Greater efficiencies are being created at PUSPAKOM via digitalisation.
divisions as most of the businesses within the grouping offer basic Inspection is now carried out entirely by automation, so there is
or essential services which are less affected by the local economic no room for human error. Data is transmitted directly from the
downturn. The concession businesses, however, are restricted to a machinery to the results sheet, greatly enhancing accuracy and
degree by concession agreements (“CAs”) with the Government which reducing the time taken to produce a report. In addition, we are
determine rates that can be charged to customers, and this could be encouraging online bookings in order to optimise the number of
challenging in an environment in which costs are escalating. inspections carried out per day by reducing the number of missed
appointments, as bookings have to be pre-paid. The service is also
Strategy convenient for customers who have ready access to the available
• Build the Logistics businesses within this division to be able to slots at different PUSPAKOM branches on its corporate website. The
provide end-to-end services and leverage on the anticipated service is due to be rolled out in 2017.
growth of the industry, driven in part by escalating use of
e-Commerce and its need for fulfilment and logistics to deliver Diversification into Green Services
goods; Alam Flora is diversifying its core business of waste collection and
disposal through its subsidiary, DRB-HICOM Environmental Services
• Increase efficiencies and expand the scope of services of our Sdn. Bhd. (“DHES”). DHES provides integrated facilities management
concessionaires, PUSPAKOM and Alam Flora, as well as diversify (“IFM”) for buildings, and is also involved in recycling. Under IFM, it
their operations in order to derive additional income to works closely with building owners to better manage their energy and
compensate for narrowing margins; and water consumption. Various energy-saving systems are offered with
attractive funding mechanisms. For recycling, it has set up a number
• Further grow our banking business and tertiary educational of collection centres in Kuala Lumpur and Putrajaya, where the
offerings at Bank Muamalat and DRB-HICOM University of local communities – including industrialists – are being encouraged
Automotive Malaysia. to dispose their recyclables. DHES is also investing in machinery to
separate garbage at landfills to recover waste that is recyclable thus
Consolidation of Logistics Businesses Under Pos Malaysia prolonging the shelf life of landfills.
As part of efforts to consolidate our logistics business, during the
financial year under review KL Airport Services Sdn. Bhd. now known Faster route to an education degree
as Pos Aviation Sdn. Bhd. (“Pos Aviation”) was subsumed under We continue to broaden the scope of offerings at DRB-HICOM
Pos Malaysia, enabling the latter to provide a complete range of University of Automotive Malaysia (“DRB-HICOM U”), and in
logistics service, including first mile, fulfilment and last mile services. FY2016/17 introduced a new and shorter route to completing a
Prior to the financial year, Pos Aviation had acquired Konsortium degree. During the year, the university received the approval for
Logistik Berhad (“KLB”) now known as Pos Logistics Berhad 12 new programmes, in addition to the existing 24 programmes.
(“Pos Logistics”) which provides land logistics services; and then The university offers diploma to degree programme for both the
DRB-HICOM Asia Cargo Express Sdn. Bhd. now known as Pos Business and Engineering programmes with duration of 5.5 years.
Asia Cargo Express Sdn. Bhd. (“Pos ACE”), which operates two Alternatively, one can enrol in the one-year foundation programme
aircrafts to deliver postal and courier items between Peninsular and continue into the degree of choice which will take four years,
including the foundation programme. This would attract even more
students to the university, both locally and internationally.
DRB-HICOM BERHAD
108 ANNUAL REPORT 2017
Adverse volatility in foreign exchange rate The financial year under review saw the property market continue
to be plagued by negative sentiment driven by a weak Ringgit and
- Effective contract negotiation, legal drafting and instrument
selection to minimise significant international transaction stringent lending policies by banks. It was reported that of the
risks. total number of applications made for loans, only about 40% were
- Vigilant trend monitoring and enhancing operational approved, as compared to about 60% in the last few years. Even
efficiency. within the residential segment, which performed better overall than
the commercial, retail and industrial sub-sectors, most key players
Intensifying Competition
deferred the launch of high-end developments and focused instead
- Continuous development and innovation of products to on the mid-tier segment.
remain relevant and value-adding in the market place.
Moving Forward
Key Highlights
We will continue to grow the Services division in line with efforts
Two key highlights of the year were the successful disposal of
to create a more balanced portfolio of businesses Group-wide.
Corwin Holding of Singapore as well as healthy sales of our affordable
As observed in this year’s financial results, Services provides a
range of products in Glenmarie Johor Phase 1B. The launch
hedge against fluctuations in the performance of the Automotive
of the 102 units of double-storey terrace houses registered a
and Property divisions, which are more directly impacted by
take-up of 68% within three months of its launch on
the prevailing economic climate.
22 October 2016.
Despite the negative sentiment in the property market, the Glenmarie brand continues to perform admirably
Moving Forward
The year 2017 looks set to continue to be challenging for the property market. While the Government has made provisions in its Budget
for an increase in housing loan entitlement for civil servants as well as for the availability of more affordable housing, these cater primarily
to first-time home buyers occupying the lower end of the market. Of greater significance for most developers, the increase in stamp duty
from 3% to 4% for property valued at more than RM1 million effective from 2018 will further dampen the market going forward.
Given early indications of the unfolding landscape, we will maintain our strategy of rolling out affordably priced products for the
immediate term in areas such as Glenmarie Puchong, Proton City, Glenmarie Johor and Glenmarie Cove. While keeping to an
affordable bracket, however, we intend to differentiate our developments from others by providing added value so as to be
‘a notch above’ similar products offered by competitors.
At the same time, we will reinforce our prestige and image by ensuring the best quality in all our products and leveraging the exclusivity
of our developments in Glenmarie Shah Alam.
A new roll-out plan will be activated to meet immediate and more medium-term demand, focused on attaining sustainable
volume in Glenmarie Shah Alam, Glenmarie Puchong, Proton City and Glenmarie Cove.
DRB-HICOM BERHAD
110 ANNUAL REPORT 2017
AUTOMOTIVE
sector
DRB-HICOM, through our companies, is involved in the entire automotive
ecosystem – from the import of Completely Built-Up (“CBU”) vehicles and
Semi Knocked-Down (“SKD”) as well as Completely Knocked-Down (“CKD”)
kits to the assembly, manufacture, distribution, sales and after sales of
motorcycles, cars, trucks, buses and speciality vehicles, including defence
vehicles. This ecosystem is complete by us being categorised as Tier-1
vendors equipped with world-class facilities to supply Original Equipment
Manufacturers (“OEMs”) parts to globally renowned names in the
automotive and aerospace sectors. We are also involved in short- and
long-term leasing and rental services.
AUTOMOTIVE DISTRIBUTION
Within this division are 13 companies that together assemble, manufacture and distribute international and local motorcycles, cars and
speciality vehicles, and provide after-sales service to customers. DRB-HICOM was ranked no. 2 in the Malaysia automotive market with
32.2% market share from all brands distributed in Malaysia. DRB-HICOM Berhad, through our subsidiary and associated companies
Isuzu Malaysia, Mitsubishi Motor and DRB-HICOM Commercial Vehicles contributed 18,568 units or 28% of total commercial vehicles
volume in 2016 (65,579 units), positioning us as the second largest among 20 active commercial vehicle distributors in Malaysia.
ACM will also intensify its focus on replacing old vehicles in the
waste management sector and supplying the needs of a growing
Established marques continue to trust our Group with their models, including
logistics sector.
German giant Mercedes-Benz
DRB-HICOM Auto Solutions Sdn. Bhd. (“DHAS”) is to collaborate with OEM partners such that marques being
imported are delivered as CKD units as opposed to CBU units to
DHAS provides end-to-end logistics solutions for the automotive avoid high import taxes thus enjoying more competitive market
industry, which encompasses the import of CBU vehicles and SKD prices. It also seeks to increase its funding facilities with existing
as well as CKD kits, forwarding and clearance, vehicle yard and potential financiers.
management, pre-delivery inspection (“PDI”) and final delivery
to dealer networks. Such services are extended to a number of DHAS is confident of an encouraging performance in FY 2017/18
major marques including PROTON, Lotus, Jeep, Audi, Volkswagen, given various developments within our Automotive division.
Honda, Mitsubishi, Isuzu, Tata, Suzuki and MODENAS. MODENAS’ recent agreements with international partners to
distribute and develop new models, for example, will require the
Both revenue and profit for the financial year grew due to increased import of CKD kits. The partnership between Geely Holding and
sales of Volkswagen CKD and new business from Proton Ertiga CKD PROTON presents the need for efficient yard management, which
kits. will see an increase of services relating to import and export.
Similarly, the introduction of other new models by various
Moving forward, DHAS has outlined key challenges faced by the companies under the Group will see enhanced demand for
company and formulated appropriate strategies to manage these a range of services offered by DHAS.
areas of concern. Key among the initiatives to be undertaken
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112 ANNUAL REPORT 2017
DRB-HICOM Commercial Vehicles Sdn. Bhd. (“DHCV”) with DRB-HICOM EZ-DRIVE Sdn. Bhd. (“EZ-DRIVE”) to dispose of its
100% stake in DRB-HICOM Leasing Sdn. Bhd. (“DLSB”). The
DHCV is the exclusive assembler and distributor of Tata exercise means that DLSB is now a wholly-owned subsidiary
commercial vehicles – pick-ups, trucks and prime movers of EZ-DRIVE which will spearhead the Group’s vehicle rental
(CBU) – in Malaysia. and leasing business. EON also disposed of Multi Automotive
Service and Assist Sdn. Bhd. (“MASA”), its call centre business,
The company sold a total of 571 units in 2016, of which 496 units to be able to focus on its core businesses.
were Tata Xenon Single Cab 4x2 Pick-up trucks with special
fabricated customised box body, purchased by Pos Malaysia. For greater operational efficiencies, the Finance, Procurement and
The year’s performance had bolstered Tata’s ranking within Human Resources functions of all subsidiaries under the company
the segment from 29 in 2015 to 10 in 2016. will now be centralised under EON.
Various strategies were implemented to boost sales which The year saw a total sales of 3,147 units for the EON Group and
includes, identifying the most competitively priced Tata models after-sales throughput of 76,872 units.
with the right specifications for the Malaysian market, while
developing specialised body applications for Tata Ultra and The business plan is part of a clearly outlined five-year journey
Xenon pick-ups to cater for business needs. To enhance dealers’ which involves diversifying EON Group’s business to include the
performance, various training programmes were held while diversification into other auto related businesses.
supporting dealers’ roadshows. Efforts were also made to increase
Tata brand awareness through targeted marketing and public EON Auto Mart Sdn. Bhd. (“EAM”)
relations activities. Additionally, the team focused on building better
relationships with bankers and credit companies to inspire greater EAM is the largest Mitsubishi Motors Malaysia (“MMM”) dealer with
confidence in financing the Tata brand. 10 sales and service outlets nationwide and accounting for 22% of
the Mitsubishi market in the country.
Moving forward, DHCV is expanding its network of sales and service
centres, targeting eight 3S and 15 2S centres by end of March 2018. During the year, EAM achieved total sales of 1,866 units of
This will be complemented by an intensified sales force recruitment Mitsubishi models, and recorded a 15% increase in throughput
initiative, followed by training to enhance the team’s competencies. to its after-sales centres which received 4,605 units. To further
build its fleet sales, the capabilities of the sales team were enhanced
There are also plans to establish a CKD/SKD assembly line for with targeted MMM 3 Diamond Training. Meanwhile, after-sales
Ultra trucks, Xenon pick-ups and Super Ace small pick-ups as this services were boosted by enabling three more outlets – in Bayan Lepas,
is imperative to overcome CBU constraints and enhance price Kota Kinabalu and Johor Bahru – offering body and paint services.
competitiveness of our products.
In October 2017, EAM will be introducing the Outlander CKD,
Edaran Otomobil Nasional Berhad (“EON”) which is expected to increase sales to various government
agencies as well as attract a larger number of higher
EON is the exclusive distributor of Jeep in Malaysia. Through its
income customers. At the same time, the company will build
100% owned subsidiaries, EON Group also sells Mitsubishi,
on its strategy of driving fleet sales while looking to grow its
Volkswagen and Audi vehicles, spare parts and accessories.
after-sales revenue and profitability through greater expansion
In addition, it is involved in the vehicle leasing business
of the body and paint services.
targeting retail, corporate and government customers.
Euromobil Sdn. Bhd. (“Euromobil”) 14% growth in sales volume while maintaining its 9% market share in
FY 2017/18. At the same time, the increase in workshop capacity in
Euromobil is the largest Audi dealer in Malaysia with five dealerships both locations will support an anticipated 20% growth in throughput.
in Damansara, Kuala Lumpur, Klang Valley, Johor Bahru and Penang.
Currently, 11 models of Audi are being imported into the country, DRB-HICOM EZ-DRIVE Sdn. Bhd. (“EZ-DRIVE”) & DRB-HICOM
all as CBU units, distinguishing Audi from other imported Leasing Sdn. Bhd. (“DLSB”)
marques in Malaysia.
EZ-DRIVE and DLSB provide leasing and rental services, with the
Euromobil’s sales picked up with the launch of the long-anticipated former holding the AVIS franchise and the latter managing the
Audi A4 in the middle of FY 2016/17. Together with launches of the MyLease brand. AVIS Malaysia is ranked a Top 3 car rental brand in
Audi Q2, Audi A5 Sportback and Audi Q5, as well as extension of the Malaysia and commands 25% of the market. Both companies provide
Audi A4 range, the company expects demand to continue to grow short- and long-term lease while EZ-DRIVE also provides short-term
into the current financial year. rental.
Supporting its sales performance, Euromobil’s after-sales department During the year under review, EZ-DRIVE acquired 100% equity in
has also shown tremendous improvement in terms of technical DLSB from EON Berhad for enhanced capital structure and financing
competence, process quality as well as field monitoring and fault viability. Following the corporate restructuring, completed on
elimination. This has been the result of conscientious efforts to 31 March 2017, EZ-DRIVE will undertake future expansion while
upskill its employees, 51% of whom hold relevant industry DLSB will continue to service existing contracts.
certification. Subsequent to Euromobil’s commendable
improvement, Malaysia was announced as the most EZ-DRIVE aims to become the preferred brand for rental and
improved market globally by Audi AG in terms of service. leasing in Malaysia, by building AVIS brand equity and promoting
brand loyalty via new strategic corporate partnerships with, for
HICOM Auto Sdn. Bhd. (“HASB”) example, AEON, Maybank, Citibank, Sports Direct Malaysia, etc.
As an authorised Volkswagen dealer, HASB has had to contend During the financial year, it opened another two stations, at Senai
with stalled growth of models being marketed under the marque Airport in Johor Bahru and Miri Airport, to increase its total network
in Malaysia along with dampened consumer confidence in the of stations nationwide to 12. Besides providing vehicle leasing
brand. In response, as of 1 September 2016, Volkswagen Passenger services to the retail and corporate sectors, EZ-DRIVE is making its
Car Malaysia (“VPCM”) has embarked on a programme to regain presence felt in the government sector, supplying non-saloon cars
consumers’ trust and ‘create experience’, with some positive results. until an existing concession agreement with another party expires in
2018.
HASB retained 9% market share among the 16 authorised
Volkswagen dealers nationwide. On the network development Spurred mainly by substantial growth in the leasing business, the
side, a new 3S centre in Semenyih became operational in fleet size of EZ-DRIVE and DLSB increased from 2,850 in FY 2016/17
January 2016, while another 3S centre started operations in to 3,065 in FY 2017/18.
Seremban in December 2016, enhancing HASB’s ability to
serve Volkswagen owners in the Klang Valley and Negeri Sembilan. EZ-DRIVE aims to continue to grow both its leasing and retail
Meanwhile, as part of a rationalisation exercise, the Cheras outlet businesses leveraging existing relationships among corporate
was closed in February 2017 and the company’s headquarters was customers, adding value to customers via the AVIS Corporate
moved to Semenyih in April 2017 for greater cost savings and leaner Partnership Programme, and engaging in constant tactical campaigns
operations. for the retail market. Having identified potential for leasing/renting
heavy commercial vehicles, it will focus on this area targeting port
With renewed market confidence in Volkswagen and a new product operators in particular in the current and coming years.
line-up inclusive of the new Passat and Tiguan, HASB expects to see
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114 ANNUAL REPORT 2017
Honda Malaysia will continue to introduce new CKD MMC and FMC
models as well as hybrid variants, and enhance Honda ownership
with the provision of quality service, high availability of spare parts
and lower cost of ownership.
Operationally, RM125 million was invested in upgrading the Honda Overall, Isuzu’s brand in the commercial vehicle sector in Malaysia
plant and expanding its warehouse. To facilitate the replacement of inched up from seventh position in 2015 to sixth in 2016.
parts that were recalled, replacement centres were set up at various
locations while mobile units travelled across the country for added
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ANNUAL REPORT 2017 115
The motorcycle market shrank by 0.1% in the calendar year with sales
of 465,168 units, as opposed to 465,483 units in 2015. MODENAS
itself achieved sales of 39,725 units in FY 2016/17, making up eight
percent of the market.
MMM will introduce the CKD versions of the very popular Outlander in the near
future
Despite the soft market, MODENAS collaborated with key global
Mitsubishi Motors Malaysia Sdn. Bhd. (“MMM”) player KYMCO to launch two new models in the third quarter of
the financial year – MODENAS Karisma 125 and MODENAS Elegan
MMM is the exclusive distributor of Mitsubishi Motors vehicles in 250. The company was also awarded KYMCO distributorship for
Malaysia. The company commands 1.6% of the local market and Malaysia effective from November 2016. Through the distributorship,
was ranked first in JD Power Asia Pacific Sales Satisfaction MODENAS’ subsidiary, Edaran Modenas Sdn. Bhd. (“EMOS”) launched
Index (“SSI”) and third in the Customer Service Index (“CSI”) in 2016. the KYMCO Downtown 250i.
It has 59 showrooms (of which 49 are 3S Centres) and 56
service outlets throughout Malaysia, with six showrooms in The year also saw MODENAS enter into another strategic
Sarawak and seven in Sabah. partnership with BAJAJ Auto Limited (“BAL”) to develop street bikes,
and a few models are expected to be launched in FY 2017/18.
During the financial year, MMM launched two new models. In The collaboration, which will assist MODENAS in the areas of
June 2016, it introduced the ASX Orange Edition. This was followed research and development as well as manufacturing, is part of a
by the launch in September 2016 of the New Triton with MIVEC transformation programme that seeks to position MODENAS as the
Turbo Diesel Engine, the first pick-up truck to offer an aluminium No. 1 motorcycle brand in the country by 2020.
diesel engine. It comes in six variants, to meet the needs of a
wider range of customers. Further building its product line-up, Along with further expansion of its motorcycle line-up, MODENAS
in March 2017, MMM introduced an enhanced, more luxurious expects to gain significant market share in FY 2017/18 and
Outlander SUV. years to come.
PROTON is Malaysia’s largest car manufacturer and the only full-fledged OEM car manufacturer in Southeast Asia, where it has a presence in
addition to operations in Australasia, the Middle East and the United Kingdom.
In 2016, the Company initiated a turnaround plan focused on increasing sales by developing the right products for the right market, while
right-sizing and ensuring a high level of competency among its workforce and finalising a strategic partnership with a renowned automobile
company. Working conscientiously on this plan, several early wins were achieved.
In terms of product development, FY 2016/17 witnessed the launch of four new model variants, namely the Perdana, Persona, Saga and Ertiga,
which were well received and contributed to total sales of 72,440 cars in 2016. Besides their significant contribution to the sales improvement
in the year, the models have been awarded with independent recognition for respective values and propositions offered to the market,
summarised as follows:
CarSifu Editor’s Choice Best Local Design of The Year New Proton Perdana 2.4 Premium
Award 2016
Best Compact Car of The Year New Proton Persona 1.6 CVT Premium
ASEAN NCAP Grand Prix Most Affordable 5-Star ASEAN NCAP Proton Iriz
Award 2016 Car in Malaysia
ASEAN Car of The Year 2016 Budget Car of The Year Proton Iriz
Malaysia Automotive Malaysia’s First Compact MPV EEV New Proton Ertiga
Institute (“MAI”) (energy-efficient vehicle)
Supporting the product line expansion, PROTON also rolled out a “Customer-First” initiative which included instilling a customer-centric
mind-set among employees, launch of a MyProton mobile application (“app”), expansion of sales and service outlets (which are open seven
days a week), and introduction of a PROTON-PETRONAS co-branded engine oil for enhanced performance of PROTON cars.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 117
YBhg Dato’ Mohd Radzaif Mohamed, (left) and YBhg Dato’ Ahmad Fuaad Kenali at the launch of the Ertiga in November 2016
MyProton enables users to interact directly with PROTON, especially were carried out, followed with the announcement on 25 May
in scheduling their PROTON car service, making appointments to test 2017 of the appointment of Zhejiang Geely Holding Group Co., Ltd.
drive PROTON models, and to access information related to model (“Geely Holding”), China’s leading automotive manufacturer, as
specifications, part price, service history, network location and its strategic partner. Geely manages a number of brands,
vehicle-related assistance. Customers can also check their service among which includes Emgrand Volvo, London Taxi and Lynk & Co.
history from the app. There is also a loan calculator for purchase
of new PROTON cars, as well as updates on current promotions Under the binding Heads of Agreement signed on 24 May 2017, Geely
and events. Independently, PROTON embarked on more active will acquire a 49.9% equity interest in PROTON and 51% of PROTON’s
engagement with the public on social media. shareholding in the sports car manufacturer Lotus Group International
Limited (“LGIL”) based in Norfolk, United Kingdom, the remaining 49%
The Group also placed significantly greater emphasis on its export of LGIL will be purchased by Etika Automobile Sdn. Bhd. Geely will
programme, with notable results. On 28 May 2016, the first batch of take the lead in production, sales and marketing of new models while
left-hand drive Proton Preve was launched in Chile. Nearer to home, PROTON will be responsible for distribution of the brand in Malaysia.
PROTON strengthened its presence in Brunei with the launch of Part of the agreement will see Geely leverage PROTON’s currently
Proton Iriz on 1 October 2016, and Proton Persona and Proton Saga underutilised production facility in Tanjung Malim as its global hub
on 27 January 2017. Following this, the Proton Iriz was launched in for the manufacture of all its right-hand cars, including Volvo.
Indonesia on 18 February 2017.
Securing a leading global automotive manufacturer as its strategic
During the year, PROTON obtained a RM1.25 billion soft loan partner is definitely a shot in the arm for PROTON, and the company
from the Government to help clear its dues to vendors. At the expects its fortune to turn positive in the near future.
same time, it is committed to engaging a foreign strategic partner
(“FSP”), an impetus towards attaining sustainable growth by
enhancing its technology, productivity, sales and customers
confidence. Due diligence and negotiations with shortlisted bidders
DRB-HICOM BERHAD
118 ANNUAL REPORT 2017
DEFENCE institutions for certain mega projects, while leveraging the smart
partnership platform for grants and export subsidies.
The Defence sector features two key players that are leaders in
their respective fields. DRB-HICOM Defence Technologies Sdn. Bhd. Crystal-balling into the future, DEFTECH is gearing all possible
is a partner to the Malaysian Armed Forces, supplying its needs efforts in enhancing its delivery commitment of current contractual
for specialised military and security vehicles while also catering to obligations. Concurrently, DEFTECH continues to maintain its
foreign military players. Composites Technology Research Malaysia leverage with existing customers and potential customers with
Sdn. Bhd., meanwhile, has an extensive network of customers a view of securing new supply and maintenance contracts crucially
among whom include global names in aerospace such as Boeing, needed to ensure the business survivability and continuity of
Airbus and UTAS. DEFTECH as a going concern. Our intelligence preparation of the
business environment, focusing on both keeping abreast with
DRB-HICOM Defence Technologies Sdn. Bhd. (“DEFTECH”) customers’ long-term procurement programmes and providing the
much needed commercial input therein, continue unabated, while
DEFTECH is a defence industry specialist with particular strength
our strategic partnership with established defence and security
in the land combat segment. The Company is involved primarily
OEMs and suppliers through business collaboration shall be closely
in the design, development and production of military, specialised
synchronised thereto.
and commercial vehicles, as well as the maintenance, repair and
overhaul (“MRO”) of vehicles used in the defence and aerospace
sectors.
Composites Technology Research Malaysia Sdn. Bhd. A320/A321 single aisle programme due to the unfavourable
(“CTRM”) foreign exchange environment.
2) enhanced manufacturing capacity – approximately RM100 million A winning factor of the Company, incorporated in September
has been invested in Building 6 to meet single aisle, A320 2012, is the ability to tap into the technological expertise of its
and A350 requirements; German-based strategic partner, HBPO GmbH, in its product design
and development.
3) enhancing operational excellence via improved overall factory
efficiency and overall equipment efficiency (“OEE”);
The financial year under review saw a significant 112% increase
in revenue year-on-year, due to BMW FEM sales volume and
4)
engineering and technology development with the
new sales recognised for Proton FEM and FEM for two new
introduction of advanced equipment and machines; and
Volkswagen models, i.e. the Passat B8 and Tiguan. In turn, this
led to growth in profit before tax from RM12,000 to RM583,000
5) people development through enhanced talent management.
year-on-year. The Company’s profit after tax was its highest to date.
Companies within this sector focus on the assembly of imported prominent marques such as Mercedes, Audi, Honda and Mazda.
vehicles and the manufacture of components for the automotive It is also collaborating with its joint venture partner to diversify
and non-automotive sectors. Most of these companies are its product offerings to include Air Guide Shutters and Centre
recognised Tier-1 manufacturers that are capable of technological Console Modules. At the same time, it is making concerted efforts
precision and sophistication required of top OEMs and other to upgrade its current ISO 9001:2008 quality management
engineering concerns globally. certification to IATF 19649. The process is expected to be completed
by June 2017.
HICOM Automotive Manufacturers (Malaysia) Sdn. Bhd.
(“HA”) HICOM-HONDA Manufacturing Malaysia Sdn. Bhd.
(“HHMM”)
In FY 2016/17, HA assembled a total of 13,015 units of premium
Mercedes-Benz C, E ,S-Class and GLC as well as Volkswagen Passat, HHMM manufactures and assembles engines and components for
Jetta, Vento and Tiguan at its plant in Peramu Industrial Estate, Honda 100cc to 125cc motorcycles. Honda motorcycles currently
Pekan. Besides that, HA also assembled Actros and Fuso Light- and occupy second spot in the local market, after Yamaha, with total sales
Heavy-Duty trucks. for the year totaling 102,819, or 22% of the market.
As part of the modernisation and expansion programme, RM230 HHMM itself manufactured 78,462 engines, which fell short of
million was invested to build a New Paint Shop (“NPS”) which will be targets due to winding down of HHMM and sales only up to
fully equipped by June 2017. It is a state of the art NPS with 360 o Feb’17. As a result of its pending liquidation, HHMM made a loss
rotation conveyor (1st in ASEAN) and specifically designed to cater for the year – due to retrenchment costs, impairments and
to aluminium body painting. The NPS will increase the painting provisions for slow-moving stocks. Otherwise, it would have
capacity from 25,000 units/year to 50,000 units/year. made a healthy profit of RM1.1 million.
HICOM HBPO Sdn. Bhd. (“HHBPO”) HICOM Diecastings Sdn. Bhd. (“HDSB”)
HHBPO is involved in the design, development and assembly of front HDSB is widely recognised as a leading casting supplier in the
end modules (“FEM”) and related components for automotive OEMs. region, specialising in engine room components for cover
It has three plants for three different lines of FEM assembly – in cylinder heads, cover timing chains, oil pumps, water pump
Pekan, Pahang for Volkswagen; Tanjung Malim, Perak for Proton; and covers, fuel pipe delivery, steering housing and bracketry.
Kulim, Kedah for BMW. It also offers value-adding processes which encompass casting,
machining and assembly.
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ANNUAL REPORT 2017 121
A strategic business transformation programme was initiated and market with mobile garbage bins, plastic road barriers as well as
is currently undergoing to achieve a higher level of manufacturing plastic road hoardings in FY2016/17.
efficiency and profitability.
Moving forward, HTS will continue to strive for excellence in both
The Company is supported by technical assistant collaborations the automotive and non-automotive industries, and looks to
with renowned technology providers Ryobi Ltd. of Japan and expand into the manufacture of aerospace components in
DongSeo Machine and Tools from Korea, while also benefiting order to create greater business synergies.
from Japanese casting technical expertise.
HICOM-YAMAHA Manufacturing Malaysia Sdn. Bhd.
(“HYMM”)
While building its core competencies, the Company also expanded
its business by embarking on export market development HYMM is involved in the manufacture and assembly of Yamaha
in automotive and non-automotive sectors to ensure its motorcycle engines and parts. Increased sales during the year
sustainability. under review led to growth in both revenue and profit before tax
from FY2015/16 levels. This was contributed in part by continued
HICOM-Teck See Manufacturing Malaysia Sdn. Bhd. dominance of Yamaha in the local motorcycle market, where it
(“HTS”)
accounts for 40% of total sales.
The economic slowdown was particularly harsh on HTS’ Thai conducive work environment.
better performance in Malaysia. Thanks to the higher sales to Cylinder machining line in December 2016, and will be rolled out
in the other production and assembly lines in 2017. Through TVP,
Proton, mainly for its new models, HTS recorded a 38.5%
personnel are trained to identify losses and implement initiatives
increase in revenue to RM337.5 million. Higher revenue
for improvement.
combined with cost savings, meanwhile, resulted in a healthy
profit before tax of RM6.6 million.
The year also saw HYMM embark on a systematic organisational Despite project delays and cancellations by customers during
transformation. A dedicated team has been put together to the year, OSI increased its revenue and profit before tax
improve operations internally and expand the business externally. marginally by both expanding and diversifying its business. Within
This will include inorganic expansion in order to remain relevant the automotive sector, it acquired new business from PROTON
and profitable. for Proton Ertiga, as well as from Honda and Volvo. It is producing
tailgates, door hinges and base comp battery sets for the new
Throughout the changes, the Company continued to comply Honda Bold Runabout Vehicle (“BRV”) and Compact Recreational
fully with ISO 9001, ISO 14001 and OSHA 18001 Quality Vehicle (“CRV”). Meanwhile, Volvo has awarded OSI the contract
Management Systems, ensuring process effectiveness and to manufacture front axle, rear axle and corner modules for the
efficiency. S90 luxury sedan.
IHM manufactures ISUZU commercial vehicles including the ISUZU Pos Aviation and racking for HTS and PHN . To date, the Company has
N-Series light-duty trucks, F-Series medium- to heavy-duty trucks managed to increase its non-auto business to 15.3% out of its total
Isuzu is currently the leader in the truck segment of the A key strategy during the year has been to enhance the quality
commercial vehicle market, with about 40% market share, a of products while maintaining costs at an optimum level via
position IHM aims to maintain despite the low-growth and increased automation, high level of machine performance,
highly competitive environment. In response to competition, enhanced skills and knowledge of personnel and process
it continues to introduce new models and variants of ISUZU improvements. Much emphasis was also placed on achieving zero
light-duty, medium-duty, heavy-duty and pick-up trucks in a defects via Supplier Quality Management (“SQM”) and the
timely manner, while enhancing safety, quality, delivery and cost implementation of new standards.
parameters.
Effective 1 February 2017, OSI has been acquired by PHN in an
FY2016/17 was also challenging due to increased material costs effort to consolidate common manufacturing activities undertaken
led by a weakening of the Ringgit against major currencies such by both companies, namely metal stamping, welding and
as the Japanese Yen (“JPY”) and Thai Baht (“THB”). To manage sub-assembly of metal components. Along with this rationalisation,
this, IHM closely monitors foreign exchange movements and OSI expects to be able to extend its footprint in dies and
DRB-HICOM BERHAD
ANNUAL REPORT 2017 123
jigs fabrication. In addition, OSI plans to build its capacity to Operationally, PHN reinforced its leadership via an organisational
fabricate and supply racking to all manufacturing and engineering restructuring that encompassed research and development (“R&D”),
companies and other customers. new business strategy and enhanced customer focus.
Key to business expansion will be to keep enhancing its customer As part of its new strategy, PHN is expanding its automotive
satisfaction, not only from quality products but also quality customer base while also venturing into non-automotive businesses,
service. Much emphasis will also be placed on recruiting and retaining leveraging its expertise in the manufacture of metal components
quality talent. to supply aerospace, industrial and consumer products. This has
enabled PHN to secure three new contracts with CTRM, Camfil and
PHN Industry Sdn. Bhd. (“PHN”) Ficosa Taichang, adding RM3 million to its order book.
SERVICES AND
education sector
POSTAL AND LOGISTICS On the back of this strong revenue growth, as well as better resources
management, more disciplined cost management and focus on
Pos Malaysia Berhad (“Pos Malaysia”) protecting product profit margins, Pos Malaysia’s profit before
tax (“PBT”) increased to RM131.4 million as compared to RM92.5
Pos Malaysia is the national postal services provider which, under the million in FY2015/16.
DRB-HICOM Group, is being transformed into a logistics hub offering
end-to-end services through its own delivery network of about 700 During the financial year, Pos Malaysia implemented an Optimisation
post offices and 100 Pos Laju outlets as well as the first and last mile of Pos Mel and Pos Laju Operations (“OPPO”), in which a targeted
capabilities of its subsidiaries. portion of courier items are delivered by postmen. OPPO is expected
to improve postmen’s productivity while addressing the manpower
Pos Malaysia completed its acquisition of Pos Aviation needs of the fast-growing courier business. Subsequent to
in mid-September 2016 via the issuance of new shares to the acquisition of the Pos Aviation group, Pos Malaysia has also
DRB-HICOM. Accordingly, Pos Malaysia is now 53.5% owned by expended much time and effort to integrate its operations with
DRB-HICOM and Pos Aviation is a wholly-owned subsidiary those of Pos Aviation. The process involves the harmonisation
company of Pos Malaysia. Through Pos Aviation, it has under of policies and procedures of the two groups, as well as integration of
its portfolio, Pos Logistics and Pos ACE. This effectively bestows financial reporting systems and optimisation of resources to enable
on Pos Malaysia the full range of warehousing, haulage, Pos Malaysia to function seamlessly in supporting customer needs.
courier and customs clearance capabilities to cater for
both domestic and regional logistics businesses. The Government’s efforts to promote Malaysia as an e-Commerce
hub with the establishment of the Digital Free Trade Zone (“DFTZ”)
Financially, the continuous decline in volume of traditional mail augurs well for Pos Malaysia in its quest to become the premiere
was more than compensated for by the increase in e-Commerce e-Commerce fulfilment and logistics player in the region. To leverage
deliveries, resulting in strong revenue growth of the courier opportunities for e-Commerce as well as to build its postal services,
business. For the first time ever, revenue from the courier business, Pos Malaysia has launched a five-year transformation plan called
registered at RM684.6 million, surpassed that of traditional mail, at SCORE 2.0 that has 19 strategic initiatives.
RM619.7 million. Together with revenue from Pos Aviation group,
totalling RM327.6 million, Pos Malaysia’s revenue for FY2016/17
reached a record of RM2.1 billion.
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ANNUAL REPORT 2017 125
Broadly, the objectives of SCORE 2.0 are: the country: KL International Airport (“KLIA”), KL International
Airport 2 (“KLIA2”), Sultan Abdul Aziz Shah Airport (Subang),
• To improve its return on investment as well as productivity of
physical assets; Bayan Lepas International Airport (Penang), Sultan Azlan Shah
Airport (Ipoh), Kota Kinabalu International Airport, Kuching
• To enhance its e-Commerce fulfilment and logistics capabilities;
International Airport and Langkawi International Airport.
• To accelerate the introduction of new income streams
leveraging on the Group’s postal infrastructure;
In FY2016/17, the Company secured 13 new airline customers
• To introduce new and innovative solutions catering to the including Qatar Airways, Thai Airways, Jeju Air, Thai Smile Airways
needs of the digital generation; and and Himalaya Airlines. With these additions, it ended the
• To expand the capabilities of its talent using technology to financial year with 34 international airlines in its portfolio.
better serve customers. In total, Pos Aviation handled 11,460 flights in KLIA and
3,249 flights in KLIA2 in 2016, marking a growth of 10.5% and
Pos Aviation Sdn. Bhd. (“Pos Aviation”) 10.8%, respectively, from the numbers in 2015.
In the longer term, development of the DFTZ at KLIA Aeropolis is • Establishing container depots in Port Klang, Kuantan and
set to further boost e-Commerce in the country, enabling Prai to support haulage operations. As at March 2017, the
SMEs and other enterprises to enjoy the perks of the world’s three depots were serving 15 shipping liners; and
first special trade zone for e-Commerce. DFTZ will facilitate
• Launch of direct e-Commerce shipments from China into
customs clearance while providing warehousing and logistics
Malaysia beginning June 2016.
facilities for production clearance and export. Being the most
strategically located among ASEAN countries and having the best These business breakthroughs contributed to Pos Logistics
administrative capabilities vis-a-vis customs clearance, Malaysia achieving a total revenue of RM35.9 million in FY2016/17.
is well-positioned to become an international trade hub, with
Pos Aviation gaining from the movement of products.
Following its integration into the Pos Malaysia Group, Pos Logistics Moving on, the Company is making headway with other
established five commercial units, namely Supply Chain Services, strategic initiatives it had outlined earlier, such as the Roll-On Roll-
Automotive Logistics, Project Logistics, e-Commerce Logistics and Off Vessels, Lead Logistics Provider (“LLP”) for Shah Alam and
Specialised Logistics. The objective was to streamline its operational Non-Vessel Operating Common Carrier (“NVOCC”). Spurring
activities and strengthen its commercial capabilities. further growth, as of FY2017/18, it has launched a new five-
year Transformation Plan that focuses on the following strategic
During the year, Pos Logistics continued to focus on a three-year initiatives:
transformation programme embarked on in March 2014 to increase
its revenue. Various strategic initiatives were introduced. Notable • Project Logistics for Infrastructure and Oil & Gas;
successes from this transformation programme during the financial • e-Commerce Hub and e-Fulfilment;
year under review include: • Specialised Logistics;
• Automotive After-Sales Spare Parts Logistics; and
• A 10-year Contract of Affreightment (“COA”) from TNB Fuel
• Pos Malaysia Freight Forwarding Sdn. Bhd.
Services Sdn. Bhd. (“TNBF”) worth USD194 million for the
carriage of bulk coal. As of March 2017, Pos Logistics
Already, Pos Logistics is working with agents and provincial
had completed eight voyages carrying nearly 700 tonnes of coal;
governments in China to establish a stronger footprint in the
e-Commerce segment, with the aim of capturing first mile logistics
• A three-year contract from Petronas Refinery Petrochemicals
fulfilment opportunities.
for the Provision of Freight Forwarding and Associated Services
for PETRONAS’ Refinery and Petrochemical Integrated
Meanwhile, it is working towards fully integrating its systems,
Development (“RAPID”) project in Pengerang, Johor. The contract,
operations, processes, policies and human resources with those of
worth USD52 million, was effective as of April 2016;
the Pos Malaysia group.
• Opening of more branches in Sabah and Sarawak ending
the financial year with seven branches in East Malaysia;
DRB-HICOM BERHAD
ANNUAL REPORT 2017 127
Alam Flora Sdn. Bhd. (“Alam Flora”) 1. waste management with the use of incinerators;
Alam Flora provides solid waste and public cleansing services 2. material recovery facilities and electronic waste; and
under concessions with the Government in Kuala Lumpur, Putrajaya
and Pahang; as well as non-concession integrated waste and 3. green and renewable energy such as the conversion of
facilities management services, and 3R activities through its plastics to fuel and the management of waste water.
subsidiary DRB-HICOM Environmental Services Sdn. Bhd. (“DHES”).
Its current 22-year concession agreement will commence on PUSPAKOM Sdn. Bhd. (“PUSPAKOM”)
1 September 2011 and will last until 31 August 2033.
PUSPAKOM undertakes all mandatory inspections of commercial
Along with the expansion of its non-concession business, Alam Flora and public vehicles in Malaysia under a concession with the
recorded an increase in both revenue and profit for FY2016/17. Government. It also offers inspection services for hire-purchase
Total revenue for the year amounted to RM746.07 million, financing, ownership transfer and insurance purposes as part
2.6% more than the RM727.32 million recorded in FY2015/16. of its non-concession business.
Profit before zakat and taxation (“PBZT”), meanwhile, was
RM94.38 million, 4% higher than that achieved in the previous FY2016/17 was challenging for the Company due to the soft
financial year. economy, which led to a 13% contraction in total industry
volume (“TIV”) from 666,667 in the calendar year 2015 to 580,124
To ensure continuous growth, Alam Flora has developed a 5-year in 2016, and therefore reduced income from hire-purchase
roadmap for the concession business, with the following focus: inspections. This was further compounded by a less frequent
mandatory inspection requirement for taxis, and increased costs.
1. To secure solid waste management and public cleansing
services in Kelantan and Terengganu; In the face of these challenges, PUSPAKOM enhanced the coverage
and accessibility of its Premier Mobile Services through the
2. To further reduce its operating costs and implement best
acquisition of new premier mobile vans and various promotions. It
waste management practices such as Deep Collection System
also invested RM7.42 million in inspection equipment and system
and Stationary Compactor; and
improvement, branch relocations and facilities enhancement with
3. To introduce waste recovery and waste management facilities the objective of further improving its service delivery, hence customer
thus help reduce the Government’s landfill management satisfaction. This strategic capital expenditure was balanced by cost
costs. Potential projects include the use of incinerators to control measures which contributed to a total of RM10.71 million in
reduce landfill waste, and waste water treatment to operational cost savings and RM3.11 million in capital expenditure
DHES, set up in October 2013, to carry out Alam Flora’s As a result of its efforts, revenue from the Premier Mobile Service
non-concession businesses, has further expanded its activities increased by 16%, contributing to a 6% growth in total net
to include building cleaning, landscaping, solid waste facilities revenue in FY2016/17 to RM141.4 million from RM133.3 million
management, integrated facility management, recycling and in FY2015/16. Together with the savings achieved, its PBZT
the collection of scrap material and end-of-life vehicles (“ELV”). grew by a significant 314% from RM3.5 million in FY2015/16
to RM14.5 million.
DRB-HICOM BERHAD
128 ANNUAL REPORT 2017
PUSPAKOM’s ongoing expansion is driven by three main in order to maintain its competitive edge. Much emphasis is being
strategies, namely to grow its non-concession and ancillary placed on digitalisation of its processes and systems while the
businesses; enhance its brand image and perception; and further Bank continues to expand its product offerings to be the preferred
improve its service delivery. In terms of image, it seeks to educate investment solutions provider to an increasing range of customer
the public on the importance of ensuring vehicles are segments. These initiatives are complemented by excellent service
roadworthy. Meanwhile various initiatives are being undertaken delivery at every touch point, supported by a more motivated
to create greater customer comfort and convenience thus staff force who are driven by attractive reward schemes.
elevating their level of satisfaction with PUSPAKOM’s service.
Its growth strategies contributed to a 1.2% increase in revenue
Going into FY2017/18, PUSPAKOM expects to maintain its concession year-on-year to RM1.2 billion for the year ended March 2017.
business revenue unless there are more mandatory inspections, for Total net income also improved, from RM533.0 million in
example for vehicles used in e-Hailing services (such as Uber and the preceding year to RM546.9 million.
GrabCar), or there is a revision in inspection rates. It will therefore
focus more on growing its non-concession businesses such as the The increase in total net income was driven mainly by stable
Premier Mobile Service, Hire Purchase Inspection and Voluntary growth in financing income, of RM60.1 million, in tandem with
Vehicle Inspection with strategic marketing and promotions. At the an expansion in gross financing that stood at RM15.2 billion
same time, there are plans to launch a one-stop centre for insurance against RM14.8 billion as at year ended March 2016. For
sales & renewal and road tax renewal while optimising the potential FY2016/17, the Bank recorded a PBT of RM170.5 million,
of rental from its office space. marking a 2.0% increase from the previous financial year.
HICOM University College Sdn. Bhd. (“HICOM University Along with efforts to increase the intake at DRB-HICOM U
College) and to strengthen its brand awareness in the education
market, student numbers have been increasing every year. With
HICOM University College owns and manages DRB-HICOM University 929 students in FY2016/17 compared to 908 students in
of Automotive Malaysia (“DRB-HICOM U”) in Pekan, Pahang and the previous year, revenue for FY2016/17 increased by
Akademi Saga, a vocational training institution, in Shah Alam, RM5.04 million.
Selangor.
Holiday Inn Kuala Lumpur Glenmarie (“HIKLG”) be the catalyst for the national broadcasting expansion initiative to
achieve international class standards similar with the Media City in
The calendar year 2016 was challenging for the tourism and hospitality Dubai, Sydney, Singapore and Manchester.
industry in Malaysia, and contributed to HIKLG recording lower guest
arrivals during FY2016/17. The business and leisure resort-styled The total cost of development under Phase 1 is estimated at
hotel in Shah Alam, Selangor achieved an average occupancy rate RM860 million, and is targeted to be completed in stages from
of 58.9% throughout the financial year with revenue totaling RM25.1 December 2017 to December 2019.
million.
CONCESSIONS
Some of the notable infrastructures that shall be offered by the
ICQS complex upon its completion by the end of 2018 are
Media City Development Sdn. Bhd. (“MCDSB”)
the provision of 20 lanes of light vehicles checkpoints and
In December 2015, DRB-HICOM Berhad acquired 51% equity in Media a 4-storey car park. The complex will also be equipped with the
City Ventures Sdn. Bhd. (“MCVSB”), the parent company of MCDSB. latest ICT equipment, comprising various wireless systems
and modern security networks.
MCDSB holds a 23-year concession from the Government and
is tasked with redeveloping the existing Angkasapuri Complex
(Phase 1) and developing a new commercial development (Phase 2)
to create the Media City campus.
initiatives
KEY
DRB-HICOM BERHAD
134 ANNUAL REPORT 2017
HUMAN CAPITAL
development
In 2016, through a People Capability Roadmap (“PCR”) Exercise, DRB-HICOM Managerial Development Programme (MDP) - Batch 1
we reviewed and clearly defined our behavioural and leadership
competencies and criteria across all functional areas, and 2.2 DRB-HICOM Management Trainee Programme
identified specific developmental plans for each competency. This for Subsidiaries (“DMTPs”)
exercise was geared towards:
• Creating a competent workforce with the right set of In 2015, we introduced the DRB-HICOM Management Trainee
competencies, values, and leadership qualities that will enable Programme (“DMTP”); a fast-track programme for freshly recruited
them to perform their best graduates aimed at accelerating their career progression in the
• Closing competency gaps and driving business growth Group. A first batch of ten fresh graduates were placed into the
programme.
@theAcademy was established to provide learning During the calendar year, there was a substantial increase in the
solutions to enhance Organisational Learning (“OL”) take-up of programmes conducted by OL, with 91% programmes as
efforts throughout the Group. Skill gaps within the Group, compared to 79% in FY 2015/16. The increase was due to effective
are identified by the management of @theAcademy which reviews of the types of training programmes carried out. There was
helps them design suitable programmes to address these also a decrease in the number of programmes postponed from
gaps through a Level 3 Training Evaluation to ensure the 30% to 11%, and zero programme cancellations, as in FY 2015/16.
effectiveness of the designed programmes. Throughout FY 2016/17, the learning centre conducted 94 courses
for 47 companies focused on personal, functional, leadership and
We have in place, a well-designed platform for the continuous business acumen development.
learning and professional development of all employees.
Penyelesaian Masalah Inovatif - PCR (2), 22 May 2017 PUSPAKOM Retreat, 23 February 2017
By enabling our people to realise their potential, we are able to @theAcademy also provided in-house consultancy to operating
nurture a high-performance culture and organisational growth companies within the Group focusing on how they could improve the
which, in turn, serve as building blocks for the Company to realise soft skills of their employees. There were 41 in-house consultancy
our vision and mission. programmes conducted in FY2016/17. A total of 140 staff completed
their Pembangunan Sumber Manusia Berhad, Train the Trainers
In FY 2016/17, a total of 53,195 employees participated in Programme (“PSMB TTT”) conducted as at 2016/17. @theAcademy
3,581 training programmes, 58% of which focused on building also conducted a personalised TTT programme called the Budaya
competencies in driving for excellence, customer focus and Kerja Cemerlang in three sessionst for CTRM in 2016/17. A total of
innovation. A total of RM16.3 million was spent on training, of which 75 participants were certified through the programme. The aim was
RM4.8 million (or 29.4%) was channelled towards non-executive to develop more competent working teams and enhance service
training. standards across our businesses.
DRB-HICOM BERHAD
140 ANNUAL REPORT 2017
SUSTAINABILITY
report
Reporting Period
1 January 2016 – 31 December 2016, unless specified.
Coverage
The scope of reporting encompasses business sectors from
Automotive, Services & Education, Property, Asset & Construction
and Group Corporate Support Services. Group Corporate Support
Services refers to the Group corporate divisions such as Group
Financial Services, Group Strategic Communications, Group Internal
Audit and more.
1. Message from Group Managing Over time, we will enhance our sustainability indicators through the
Director on DRB-HICOM’s Sustainability adoption of various initiatives. The conversion of waste to energy is
Performance and Endeavours one area where we hope we can excel in. Alam Flora is after all in the
business of waste collection, and we have a duty to find ways on how
As a business, our aim is to contribute positive returns for the we can convert the tonnes of waste that is produced by Malaysians
benefit of our shareholders and stakeholders. However, as we daily into energy, or even into renewable alternatives through
seek to generate profits, we acknowledge the need to adopt recycling.
sustainable initiatives in terms of protecting and preserving the
environment ensuring positive social impacts; whilst ensuring 2. Sustainability Strategy
Malaysia grows as a country as a result of our activities.
DRB-HICOM is dedicated to protecting the environment, reducing the
DRB-HICOM, in carrying out its business practices, must ensure that it rate of accidents, promoting healthy living and developing human
adopts sustainability-centric activities to complement its endeavours resource capability across the Group. The Group is establishing its
towards protecting and conserving the resources that it utilises in its sustainability strategies to create regional trust and credibility.
business operations.
Our Group-wide strategy plan between 2017 and 2021 includes a
Our commitment is that we will abide by globally-accepted total of three key targets. The priorities and principles shown below
sustainable practices in the course of doing business. It is through will govern the entire business practices and operations of the Group
these practices that we will be able to build confidence amongst our within its key four sectors: (1) Automotive, (2) Services & Education,
stakeholders, which include our employees, our stakeholders and (3) Property, Assets & Construction, and (4) Group Corporate Support
our customers. Services. These strategic targets are;
This is not going to be achieved overnight but the fact is, we are Environment – Reduction of energy consumption and waste
taking steps to ensure that we employ sustainable practices across generation by 8%;
the Group. Eventually, we aim for DRB-HICOM to be recognised as an
environmentally-friendly and sustainable brand. Safety and Health - Reduction of total number of incidents
by 8%; and
Across our Group, there are already initiatives employed to improve
sustainability. We are proud of these initiatives especially when Capacity Building – Hiring competent safety and
innovation and technology forms the basis of the efforts. Throughout environmental personnel and provide training for such
the Sustainability Report, we would present the various sustainability personnel.
initiatives embarked on by the Group throughout the reporting
period which have positively impacted various stakeholders. We believe commitment and meeting these targets is essential for
DRB-HICOM to achieve higher standards of sustainability.
We are a large and diversified group, and that alone presents some
challenges. One of it is ensuring that the sustainability value is Our Group Safety, Health and Environment (“SHE”) Division has
cascaded down across the Group, and the other is collecting data and developed a database system called Integrated Reporting
information across the various facets of our businesses. Occupational Safety, Health & Environment, or commonly known as
IROSHE. It allows data collection and dissemination of information to
This report is a culmination of the effort to streamline the initiatives the related SHE persons-in-charge and Head of Companies
of the Group towards sustainability. It requires a Group-wide effort throughout the Group. Further to that, all information is reported to
to look at the way we conduct our business, measure these efforts, the Senior Management of DRB-HICOM on a quarterly basis.
determine the gaps and more importantly, identify and adopt
measures to close these gaps.
DRB-HICOM BERHAD
142 ANNUAL REPORT 2017
DRB-HICOM’s sustainability committee intends to set a strong foundation for the rigorous and innovative integration of sustainability
principles across the Group.
The Board Risk and Sustainability Committee (“BRSC”) oversees the risk management and sustainability functions to ensure efforts are aligned
to the Group’s long term business and environment strategy. Sustainability Steering Committee (“SSC”) recommends the direction that aligns
the sustainability targets to the overall goals of DRB-HICOM and prioritises key sustainability matters. Further, the Sustainability Working
Committee (SWC) functions as a gatekeeper on all sustainability related information and performs assessments on sustainability related
programmes.
Throughout this process, BRSC seeks to inform and inspire the DRB-HICOM community regarding sustainable development as a business tool
as well as a powerful opportunity to positively impact the Group.
4. Stakeholder Engagement
DRB-HICOM’s success is a direct result of strategic planning and maintaining a long-term bona fide relationship with its stakeholders.
DRB-HICOM evaluates its key business sectors and its supply chain, to understand how they affect the Group’s stakeholders and the industry
as a whole.
As one of Malaysia’s leading conglomerates, DRB-HICOM believes in keeping a long-term committed engagement and transparent
communication with its stakeholders. This focus on stakeholder engagement creates a synergistic opportunity for the Group to enter into
global marketplace and expand beyond the nation’s borders. Table 1 displays the Group’s stakeholders with their key sustainability-related
topics and forms of engagement occurring throughout the year.
5. Materiality Assessment
Materiality in the context of sustainability involves taking account of DRB-HICOM’s Economic, Environmental and Social (“EES”) impact
assessments and the corresponding decisions of its stakeholders. The Group’s sustainability strategy focuses primarily on the critical
materiality issues of its business operations.
DRB-HICOM uses the Global Reporting Initiative (“GRI”) G4 indicators, as listed below, to highlight the materiality issues that have a significant
impact on its business and stakeholders.
The materiality assessment process enables DRB-HICOM to chart out its sustainability matters thereby presenting a possibility for better
business strategic performance in the short, medium and long term. The issues were prioritised based on a qualitative review of their
significance to DRB-HICOM, and their importance to the stakeholders.
The materiality matrix below is a visual representation of the indicators in order of priority. This is a result of an extensive review and
engagement from key internal stakeholders, including Senior Management conducted by an independent sustainability consultant.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 145
Safety, health and environment are DRB-HICOM’s core values. The Group makes it a priority to meet both internal and external compliance
requirements and the expectations of the regulators, especially in matters relating to safety, health and environment. Effort is taken on the
part of the organisation to uphold its safety, health and environment commitments and practices and to ensure no compromise is made in
executing the same. To date, there are more than 150 SHE practitioners in the Group. The Safety, Health and Environment (“SHE”) Council is
headed by the Group Managing Director with active participation from Senior Management of the Group. The Group SHE acts as secretariat
to the council.
The Group’s SHE policy focuses on four key principles: Compliance, Prevention of Pollution, Communication and Continuous Improvement.
Compliance ensures that the organisation adheres to all legislative and regulatory requirements, code of conduct, and best practices.
Prevention of Pollution identifies and implements green practices in the workplace to minimise and prevent pollution. Communication is an
effective tool the Group uses to disseminate the SHE policy and to engage with all stakeholders within DRB-HICOM companies. The fourth
principle, Continual Improvement reduces the potential hazards, risks and impact to the environment and to health and safety.
Chart 3 below depicts the Group’s incident rate across four sectors - Automotive, Services & Education, Property, Asset & Construction and
Group Corporate Support Services - from January to June 2016 and from July to December 2016, respectively.
Case 1:
Case 2:
Training for respirator fit test and hearing protection by 3M; and
Exhibition and talk for unsafe acts and conditions on the road by
Jabatan Keselamatan Jalan Raya (“JKJR”).
7. Environment
DRB-HICOM has been proactive and committed to protecting and improving the environment surrounding the Group’s operations.
Sustainable green practices have been embedded within its operations to ensure that business is profitable for the shareholders as well
as have a minimal impact on the environment. Several policies are in place to fortify and strengthen the protection of the environment
in all aspects of its operations. They include the Safety, Health, & Environment (“SHE”) Policy and Enterprise Risk Management Policy.
We are committed to achieve a better environment and are guided by the following regulations:
DRB-HICOM’s Enterprise Risk Management (“ERM”) plays a significant role in identifying environmental risks in order to reduce the
environmental impacts from the company’s operations. The environmental risks were measured and prioritised using the
Risk Assessment Matrix with regard to significance and probability of occurrence of the risk. Risk assessment coupled with risk indicators allows
effective measurement and tracking of strategic controls as well as action plans identified in the corporate risk register.
The total energy consumption of DRB-HICOM Group of Companies in 2016 was 384 million kWh, equivalent to 284,544 tonnes CO2.
Chart 4 shows the breakdown of total energy consumed (kWh) based on various sectors, which was collected nationwide covering all
subsidiaries of the Group.
Group Corporate
Support Services
1%
As at 31 December 2016
The Automotive industry involves equipment and facilities that are energy intensive. The energy consumption of PROTON itself took up 47.2%
of the total energy usage. To mitigate the high energy usage, the PROTON Green Initiatives was established in FY2016 with the objective of
reducing the utility costs for PROTON plants and offices.
Several initiatives have been implemented and are underway in the four main PROTON manufacturing plants. Thus far, the PROTON Green
Initiatives programme has achieved a total electricity bill reduction of RM 10 million in FY2016 and further reduction of RM 5.9 million between
April to December 2016.
Table 2 shows the list of initiatives and achievements attained from the four manufacturing plants of PROTON.
Table 2: Initiatives towards Excellent Cost Savings, Energy Savings and CO2 Reduction
1 Perusahaan Improvement of compressed air operation’s efficiency and Energy saving of 2,465,764 kWh
Otomobil Nasional energy conservation Cost saving of RM 715,000
Sdn Bhd (PONSB) The compressed air pressure was reduced from 7 bar to 6.3 bar Greenhouse Gas emission
Optimisation of painting shop operation reduction of 1,793 tonnes CO2
Improvement of lighting and air-conditioner operation Energy saving of 1,398 kWh
temperature and hours per car
Awareness campaign (Setup of banner, bunting and signage
across the plants)
2 PROTON Tanjung Rectification of compressed air leakages Energy saving of 11,384,816 kWh
Malim Sdn. Bhd. During no-production weekend, only utilise 1 compressor Cost saving of RM 3.3 million
(PTMSB) instead of 2 units Greenhouse Gas emission
The compressed air pressure was reduced from 7 bar to 6 bar reduction of 8,277 tonnes CO2
The replacement of vortex coolers with force convection fan Energy saving of 1,505 kWh
system for control panels for more useful and efficient heat per car
transfer
Awareness campaign (Setup of banner, bunting and signage
across the plants)
3 PROTON Casting Reschedule of furnace operation and sequencing for Energy saving of 3,471,017 kWh
Plant Maximum Demand charges savings Cost saving of RM 1.46 million
The compressed air supply pressure was reduced from 7 bar Greenhouse Gas emission
to 6.3 bar reduction of 2,523 tonnes CO2
Optimisation of chiller operation schedule Energy saving of 2,546 kWh per
Replacement of metal halide to Light Emitting Diode (LED) tonnes
bulbs for energy saving and reduction of maintenance costs
Awareness campaign (Setup of banner, bunting and signage
across the plants)
4 PROTON Centre of Optimisation of chiller operation schedule and operation of Energy saving of 1,287,185 kWh
Excellence (COE) only 1 chiller during weekends Cost saving of RM 469,000
Limitation of number of Air Handling Unit (AHU) operations Greenhouse Gas emission
during weekend and optimisation of indoor temperature reduction of 936 tonnes CO2
operation at 24 ⁰C
A switch of Tariff (C2->C1) and the application of Off Peak
Tariff Rider (OPTR) for Maximum Demand charges savings.
Awareness campaign (Setup of banner, bunting and signage
across the plants)
As at 31 December 2016
DRB-HICOM recognises the risk of climate change and the contribution of the automotive sector towards the emission of greenhouse gases
(GHGs). The Group has implemented various initiatives to reduce its contribution to GHG emissions. The Government of Malaysia is signatory
to the Kyoto Protocol and the GHG reduction initiatives undertaken by the Group are in line with the requirements of the protocol.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 151
The first Buy Back Centre (BBC) in Kuala Lumpur was officially
launched on 11 May 2016. It functions as a one-stop centre to buy
back used items from the public at market price and at the same time
spreading the awareness of recycling. Among the materials that were
collected by BBC are mixed papers and bottles, UHT packaging, iron
cans and scrap, aluminium cans, computers, and used cooking oil.
8. Human Capital Development in a transparent, appropriate and fair manner. The Code covers
pertinent issues including tardiness, honesty, integrity and
8.1. Group Policy and Governance relationship between employees and stakeholders.
DRB-HICOM strongly endorses the collective bargaining system Team-building sessions and induction programmes continuously
to ensure a mutually beneficial economic and social relationship highlight the importance of Integrity, Decorum, Innovation,
between the employers of the Group and trade unions. The Excellence, Transparency, Teamwork and Quality. The “No Gift
collective agreement helps to clarify the rights and responsibilities Policy” in DRB-HICOM prohibits employees from receiving gifts from
of the Company and its employees, to achieve success for both the external parties. This practice exhibits and upholds the values of
Company and its employees. dignity, integrity, and professionalism in all its business dealings.
DRB-HICOM also engages with the Malaysian Anti-Corruption
Total Union Members in DRB-HICOM Group 25,230 Commission (MACC) to mitigate corruption across the Group.
Workforce Breakdown
by Age Group
DRB-HICOM has a comparatively young workforce with 41% of total Group Human Capital acknowledges the contribution brought on
workforce below the age of 30 and 30% between the ages of 31 to 40. by the female employees in DRB-HICOM by organising various
We believe in nurturing young top talents within the Group and at the activities in conjunction with International Women’s Day on an
same time ensuring a sustainable talent pool for our future business annual basis. One of the campaigns conducted was Pinktober Day on
growth. 26 October 2016 in conjunction with the Breast Cancer Awareness
Month. Group Human Capital collaborated with Pink Ribbon Deeds
8.3. Gender Diversity (PRIDE) Foundation to raise awareness on breast cancer through
talks by certified medical practitioners. On Pinktober Day, employees
were also urged to show their support by wearing pink attire and pink
ribbons.
As at 31 December 2016
The Group has a comprehensive talent development programme with the aim to create talent pools at all levels. The initiative consists of a
series of programmes starting from Management Trainee Programme for fresh graduates up until the top level Leadership Development
Programme which aims to groom DRB-HICOM’s future leaders. Chart 8 below shows the various talent programmes devised by Group
Human Capital across the Group.
Please refer to page 135 for the results of the programmes conducted in this financial year.
DRB-HICOM BERHAD
156 ANNUAL REPORT 2017
As at 31 December 2016
The employees’ career development programme is important for both employees and the future of DRB-HICOM. In FY2017, we have invested
RM16.8 million in training and education and this amount enabled us to provide more than 1 million quality training hours. This translates to
an average of 17 training hours per employee. The goal is to help them become better workers and to equip them with the skills they need
to manage themselves and their teams.
9.
Local Community Engagement and Social Contributions
Umrah Packages for Paralympic Medal Winners Safety and Health Campaign
DRB-HICOM sponsored the Malaysian Paralympians with a 12 A Safety and Health campaign was organised for Warga to conduct
days Umrah Package as recognition for their performance at Rio free dental screening, internal body toxicity analysis, spine and
Paralympics 2016. The 23 member group consists of the Paralympians joint analysis, bone density check, heart diseases and back pain
and their family members, media and accompanying officers from consultation in the two day event. The National Blood Centre and
MSN. 133 volunteers from DRB-HICOM Berhad together with neighbouring
subsidiary companies registered for the blood donation and managed
to collect 54.85 pints of blood for the public.
Developing Skills for the Underprivileged Road Safety Campaign and Vehicles Inspections
DRB-HICOM initiated the Heart Project, a programme aimed at PUSPAKOM collaborated with the Road Safety Department on Road
developing the skills of underprivileged children with the objective of Safety Campaigns in conjunction with the festive season to share
nurturing the nation’s youth in creating a better future for students information with the local communities on the importance of road
through education. Underprivileged children were offered safety. PUSPAKOM also offered free voluntary vehicle inspection to
scholarships to Akademi Saga, a vocational training academy to equip private vehicle owners prior to Hari Raya Aidilfitri, having successfully
these youths with employable skills. DRB-HICOM also sponsored inspected a total of 1,383 vehicles in 2016.
four SBJK students with full scholarships in Automotive Workshop
Practices & Engine Cooling System Rectification Work at the Akademi
Saga. It is a 12-month course in automotive training which focuses
on nurturing future technicians by providing them with essential
technical skills.
DRB-HICOM BERHAD
158 ANNUAL REPORT 2017
DIRECTORS’ REPORT
DIRECTORS' REPORT
The Directors of DRB-HICOM Berhad hereby submit their report together with the audited financial
statements of the Group and of the Company for the financial year ended 31 March 2017.
PRINCIPAL ACTIVITIES
The Company is an investment holding company with investments in the automotive (including defence and
composite manufacturing), services (including integrated logistics, banking and postal businesses) and
property, asset and construction segments. There was no significant change in these activities during the
financial year.
Information relating to the subsidiary companies, joint ventures and associated companies are described in
Note 3 to the financial statements.
FINANCIAL RESULTS
Group Company
RM’000 RM’000
DIVIDENDS
Dividends paid and proposed by the Company since 31 March 2016 was as follows:
RM’000
In respect of the financial year ended 31 March 2016:
Single tier first and final dividend of 2.0 sen per share, paid on 1 November 2016 38,665
The Directors recommend the payment of a single tier first and final dividend of 1.0 sen per share amounting
to RM19,332,371 in respect of the financial year ended 31 March 2017, subject to the approval of
shareholders at the forthcoming Annual General Meeting of the Company.
All material transfers to or from reserves and provisions during the financial year are disclosed in the
financial statements.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 163
The details of significant and subsequent events are as disclosed in Notes 57 and 58 to the financial
statements.
The Directors of the Company who have held office during the period since the beginning of the financial
year to the date of this report are:
Brig. Gen. (K) Tan Sri Dato’ Sri (Dr.) Haji Mohd (Chairman)
Khamil bin Jamil
Dato’ Sri Syed Faisal Albar bin Syed A.R. Albar (Group Managing Director)
Datuk Ooi Teik Huat
Dato’ Ibrahim bin Taib
Dato’ Siti Fatimah binti Daud (Appointed on 1 April 2016)
Datuk Idris bin Abdullah @ Das Murthy (Appointed on 1 January 2017)
Dato’ Abdul Rahman bin Ahmad* (Appointed on 16 May 2016 and retired on
29 September 2016)
Datuk Haji Abdul Rahman bin Mohd Ramli* (Retired on 29 September 2016)
Ong Ie Cheong (Resigned on 1 January 2017)
Tan Sri Marzuki bin Mohd Noor (Resigned on 1 January 2017)
* The Directors did not seek for re-election at the Annual General Meeting on 29 September 2016.
DIRECTORS’ INTERESTS
According to the Register of Directors’ Shareholdings, particulars of interests of Directors of the Company who
held office at the end of the financial year, in shares of the Company and in its related corporations were as
follows:
Holding Company
Etika Strategi Sdn. Bhd.
Direct interest
Brig. Gen. (K) Tan Sri Dato’ Sri
(Dr.) Haji Mohd Khamil bin
Jamil 30,000 - - 30,000
Other than as disclosed above, according to the Register of Directors’ Shareholdings, none of the other
Directors of the Company in office at the end of the financial year held any interest in shares in the Company
or its related corporations during the financial year.
DRB-HICOM BERHAD
164 ANNUAL REPORT 2017
DIRECTORS’ BENEFITS
During and at the end of the financial year, no arrangement subsisted to which the Company is a party,
being arrangements with the object or objects of enabling Directors of the Company to acquire benefits by
means of the acquisition of shares in, or debentures of, the Company or any other body corporate.
Since the end of the previous financial year, no Director has received or become entitled to receive a benefit
(other than emoluments disclosed in Note 7 to the financial statements) by reason of a contract made by the
Company or a related corporation with the Director or with a firm of which the Director is a member, or with a
company in which the Director has a substantial financial interest.
DIRECTORS’ INDEMNITY
Directors’ liability insurance is in place to protect the Directors of the Company against potential costs and
liabilities arising from claims brought against the Directors.
The following is a list of Directors of the subsidiary companies who have held office during the period since
the beginning of the financial year to the date of this report:
Brig. Gen. (K) Tan Sri Dato’ Sri (Dr.) Haji Mohd Tengku Dato’ Seri Hasmuddin bin Tengku Othman
Khamil bin Jamil
Dato’ Sri Syed Faisal Albar bin Syed A.R. Albar Tan Sri Dato’ Dr Mohd Munir bin Abdul Majid
Datuk Mohamed Razeek bin Md Hussain Tan Sri Dato’ Seri Mohd Zahidi bin Haji Zainuddin
Maricar
Dato’ Abdul Harith bin Abdullah Gen. Tan Sri Dato’ Sri Roslan bin Saad
Dato’ Khalid bin Abdol Rahman Dato’ Sri Che Khalib bin Mohamad Noh
Dato’ Chan Choy Lin Dato’ Azmi bin Abdullah
Dato’ Haji Mohd Redza Shah bin Abdul Wahid Dato’ Haji Kamil Khalid Ariff
Dato’ Ahmad Fuaad bin Mohd Kenali Dato’ Mohamad bin Saif @ Saib
Dato’ Md Radzaif bin Mohamed Dato’ Haji Mohd Izani bin Ghani
Dato’ Haji Mohd Zain bin Haji Hassan Dato’ Wong Lum Kong
Dato’ Mohd Shukrie bin Mohd Salleh* Dato’ Lim Tiong Boon
Dato’ Bahar bin Ahmad Dato’ Hilmi bin Mohd Noor
Dato’ Haji Amril bin Samsudin Dato’ Eshah binti Meor Suleiman*
Dato’ Azlan bin Shahrim* Dato’ Ibrahim Mahaludin bin Puteh*
Amalanathan Thomas Dato’ Abdul Hamid bin Sh Mohamed*
Aminah binti Othman Dato’ Sri Dr. Mohmad Isa bin Hussain*
Hamizan bin Osman Dato’ Zainudin bin Che Din
Rohime bin Shafie Dato’ Sri Solah bin Mat Hassan
Ainol Azmil bin Abu Bakar Dato’ Dr. Adnan bin Alias
Mohammed Shukor bin Ismail Datuk Kamarudin bin Md Ali
Mohd Aslam Khan bin Farikullah Datuk Puteh Rukiah binti Abd Majid*
Mohd Khalid bin Yusof Datuk Lee Chin Yong
Shuhaida binti Nun Dr. Azura binti Othman
Muhammad Noor bin Abd Aziz @ Hashim* Dr. Hans Eggenberger
PeerMohamed bin Ibramsha Lim How Ghee
Azman Hanafi bin Abdullah Rin Nan Lun
Fakihah binti Azahari Rin Nan Yoong
Mohamad Fazly bin Hassan Ho Chun Foh
DRB-HICOM BERHAD
ANNUAL REPORT 2017 165
The following is a list of Directors of the subsidiary companies who have held office during the period since
the beginning of the financial year to the date of this report: (Continued)
The following is a list of Directors of the subsidiary companies who have held office during the period since
the beginning of the financial year to the date of this report: (Continued)
Before the statements of comprehensive income and statements of financial position were made out, the
Directors took reasonable steps:
(a) to ascertain that action had been taken in relation to the writing off of bad debts and the making of
allowance for doubtful debts and had satisfied themselves that all known bad debts had been written
off and that adequate allowance had been made for doubtful debts; and
(b) to ensure that any current assets which were unlikely to realise their values as shown in the
accounting records of the Group and of the Company in the ordinary course of business had been
written down to an amount which they might be expected so to realise.
At the date of this report, the Directors are not aware of any circumstances:
(a) which would render the amounts written off for bad debts or the amounts of the allowance for
doubtful debts made in the financial statements of the Group and of the Company inadequate to any
substantial extent;
(b) which would render the values attributed to current assets in the financial statements of the Group
and of the Company misleading; and
(c) which have arisen which would render adherence to the existing method of valuation of assets or
liabilities of the Group and of the Company misleading or inappropriate.
No contingent or other liability has become enforceable or is likely to become enforceable within the period of
12 months after the end of the financial year which, in the opinion of the Directors, will or may substantially
affect the ability of the Group or of the Company to meet their obligations as and when they fall due.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 167
(a) any charge on the assets of the Group and of the Company which has arisen since the end of the
financial year which secures the liability of any other person; or
(b) any contingent liability of the Group and of the Company which has arisen since the end of the
financial year.
At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this
report or the financial statements of the Group and of the Company which would render any amount stated in
the financial statements misleading.
In the opinion of the Directors, other than as disclosed in the financial statements:
(a) the results of the Group’s and of the Company’s operations during the financial year were not
substantially affected by any item, transaction or event of a material and unusual nature; and
(b) there has not arisen in the interval between the end of the financial year and the date of this report
any item, transaction or event of a material and unusual nature likely to substantially affect the
results of the operations of the Group or of the Company for the financial year in which this report is
made.
HOLDING COMPANY
The Directors regard Etika Strategi Sdn. Bhd., a company incorporated in Malaysia, as the holding company.
AUDITORS
The auditors, Ernst & Young, have expressed their willingness to continue in office.
Signed on behalf of the Board in accordance with a resolution of the Directors dated 10 July 2017.
BRIG. GEN. (K) TAN SRI DATO’ SRI (DR.) HAJI MOHD KHAMIL BIN JAMIL
Chairman
Group Company
2017 2016 2017 2016
(Restated)
Note RM’000 RM’000 RM’000 RM’000
STATEMENTS
STATEMENTSOFOFCOMPREHENSIVE
COMPREHENSIVEINCOME
INCOMEFOR
FORTHE
THEFINANCIAL
FINANCIALYEAR
YEARENDED
ENDED3131MARCH
MARCH2017
2017
(Continued)
(Continued)
Group
Group Company
Company
2017
2017 2016
2016 2017
2017 2016
2016
(Restated)
(Restated)
Note
Note RM’000
RM’000 RM’000
RM’000 RM’000
RM’000 RM’000
RM’000
Other
Othercomprehensive
comprehensive (loss)/income
(loss)/income
(Continued)
(Continued)
Sub-total
Sub-totalbrought forward
brought forward (10,828)
(10,828) 60,711
60,711 - - - -
Reclassification
Reclassificationadjustments:
adjustments:
Transfer of reserve
Transfer of reserve ofof
aa foreign subsidiary
foreign subsidiary
company
company toto
profit oror
profit loss
lossupon
upondisposal
disposal (37,387)
(37,387) - - - - - -
Transfer of reserve of an associated
Transfer of reserve of an associated
company
company toto
profit oror
profit loss
lossupon
upondisposal
disposal - - (4,604)
(4,604) - - - -
Other
Othercomprehensive
comprehensive (loss)/income
(loss)/income forfor
the
the
financial year
financial year(net ofof
(net tax)
tax) (48,215)
(48,215) 56,107
56,107 - - - -
Total
Totalcomprehensive
comprehensive(loss)/income
(loss)/incomeforfor
the
the
financial
financialyear
year (308,617)
(308,617) (815,514)
(815,514) 356,519
356,519 (389,272)
(389,272)
Net
Net(loss)/profit
(loss)/profitforfor
the
thefinancial
financialyear
year
attributable
attributableto:to:
Owners
Ownersofof the
theCompany
Company (454,401)
(454,401) (992,763)
(992,763) 276,864
276,864 (466,137)
(466,137)
Holders
Holdersofof
Perpetual
PerpetualSukuk
Sukuk 79,655
79,655 76,865
76,865 79,655
79,655 76,865
76,865
Holders
HoldersofofRedeemable
RedeemableConvertible
Convertible
Cumulative
CumulativePreference
PreferenceShares
Shares 40,685
40,685 - - - - - -
Non-controlling
Non-controllinginterest
interest 73,659
73,659 44,277
44,277 - - - -
(260,402)
(260,402) (871,621)
(871,621) 356,519
356,519 (389,272)
(389,272)
Total
Totalcomprehensive
comprehensive (loss)/income forfor
(loss)/income the
the
financial
financialyear attributable
year attributableto:to:
Owners
Ownersofof the
theCompany
Company (500,127)
(500,127) (941,273)
(941,273) 276,864
276,864 (466,137)
(466,137)
Holders
Holdersofof
Perpetual
PerpetualSukuk
Sukuk 79,655
79,655 76,865
76,865 79,655
79,655 76,865
76,865
Holders
HoldersofofRedeemable
RedeemableConvertible
Convertible
Cumulative
CumulativePreference
PreferenceShares
Shares 40,685
40,685 - - - - - -
Non-controlling
Non-controllinginterest
interest 71,170
71,170 48,894
48,894 - - - -
(308,617)
(308,617) (815,514)
(815,514) 356,519
356,519 (389,272)
(389,272)
Basic
Basicand
anddiluted loss
diluted lossper
pershare
share(sen)
(sen) 1212 (23.50)
(23.50) (51.35)
(51.35)
The notes
The
The setset
notes
notes out on
setout pages
outon 182
onpages
pages toto350
2121 to189form
189form an
form integral
anan part
integral ofofthe
part
integral part ofthefinancial
the statements.
financial statements.
financial statements.
DRB-HICOM BERHAD
170 ANNUAL REPORT 2017
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2017
As At 31 March 2017
2017 2016
(Restated)
Note RM’000 RM’000
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment 13 6,352,474 5,708,050
Concession assets 14 217,152 227,051
Prepaid lease properties 15 50,813 52,024
Investment properties 16 246,889 617,955
Land held for property development 17(a) 1,182,226 985,141
Joint ventures 19 413,826 451,023
Associated companies 20 756,543 1,364,616
Intangible assets 21 1,812,523 1,680,322
Deferred tax assets 22 147,192 91,719
Investment securities: financial assets at fair value through
profit or loss 23(a)
- Banking 197,208 186,355
Investment securities: available-for-sale 23(b)
- Banking 5,040,929 5,058,434
- Non-banking 46,153 46,203
Investment securities: held-to-maturity 23(c)
- Banking 142,168 140,607
Trade and other receivables 29 264,144 104,589
Other assets 24 516 441
Banking related assets
- Financing of customers 25 10,772,103 10,600,485
- Statutory deposit with Bank Negara Malaysia 26 698,636 703,261
28,341,495 28,018,276
CURRENT ASSETS
Assets held for sale 27 4,500 10,819
Inventories 28 2,285,452 1,760,627
Property development costs 17(b) 140,186 284,145
Trade and other receivables 29 3,859,027 4,274,409
Tax recoverable 198,533 243,000
Investment securities: financial assets at fair value through
profit or loss 23(a)
- Non-banking 175 -
Investment securities: available-for-sale 23(b)
- Banking 1,090,487 641,732
Banking related assets
- Cash and short-term funds 32 1,049,925 1,069,101
- Financing of customers 25 3,939,713 3,726,891
Short term deposits 30 1,332,531 1,420,553
Cash and bank balances 31 1,544,331 550,999
Derivative assets 33 61,494 40,951
15,506,354 14,023,227
The notes set out on pages 182 to 350 form an integral part of the financial statements.
The notes set out on pages 21 to 189 form an integral part of the financial statements.
DRB-HICOM BERHAD
172 ANNUAL REPORT 2017
COMPANY STATEMENT OF
FINANCIAL POSITION
As At 31 March
COMPANY STATEMENT 2017 POSITION AS AT 31 MARCH 2017
OF FINANCIAL
2017 2016
Note RM’000 RM’000
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment 13 120 371
Investment properties 16 130,654 136,355
Subsidiary companies 18 8,393,610 8,118,732
Joint ventures 19 4,686 4,686
Associated companies 20 61,170 676,440
8,590,240 8,936,584
CURRENT ASSETS
Trade and other receivables 29 1,223,107 1,146,431
Short term deposits 30 223,771 239,534
Cash and bank balances 31 33,707 11,909
1,480,585 1,397,874
TOTAL ASSETS 10,070,825 10,334,458
NON-CURRENT LIABILITIES
Long term borrowings 38 1,538,388 1,405,632
Deferred tax liabilities 22 647 1,278
1,539,035 1,406,910
CURRENT LIABILITIES
Trade and other payables 43 1,569,910 1,741,705
Bank borrowings - Others 44 245,631 708,694
Tax payable 2,120 1,199
1,817,661 2,451,598
The notes set out on pages 182 to 350 form an integral part of the financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For The Financial Year Ended 31 March 2017
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 MARCH 2017
Redeemable
Non-distributable
Convertible
Cumulative
Equity Preference
Share Merger Currency Available- Other attributable to Perpetual Shares Non-
Capital Share Reserve Translation for-sale Reserves Retained Owners of the Sukuk (“RCCPS”) controlling
(Note 34) Premium (Note 47) Differences Reserve (Note 48) Earnings Company (Note 35) (Note 36) Interest Total
Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
2017
At 1 April 2016 1,719,601 20,701 1,000,039 (43,631) 6,749 367,638 3,471,991 6,543,088 1,051,859 - 908,342 8,503,289
Prior year’s adjustments 51(i)(f) - - - - - - (863) (863) - - 17 (846)
As restated 1,719,601 20,701 1,000,039 (43,631) 6,749 367,638 3,471,128 6,542,225 1,051,859 - 908,359 8,502,443
Transfer of share premium
on 31 January 2017 20,701 (20,701) - - - - - - - - - -
Net (loss)/profit for the
financial year - - - - - - (454,401) (454,401) 79,655 40,685 73,659 (260,402)
Other comprehensive
(loss)/income for the
financial year, net of tax - - - (42,291) (8,107) 4,672 - (45,726) - - (2,489) (48,215)
Total comprehensive
(loss)/income for the
financial year - - - (42,291) (8,107) 4,672 (454,401) (500,127) 79,655 40,685 71,170 (308,617)
Transactions with Owners
Net issuance of RCCPS - - - - - - - - - 1,248,865 - 1,248,865
Distribution to holders of
Perpetual Sukuk - - - - - - - - (79,675) - - (79,675)
Disposals of subsidiary
companies 52(i) - - (1,965) - - - 1,965 - - - (27,185) (27,185)
Sub-total carried forward 1,740,302 - 998,074 (85,922) (1,358) 372,310 3,018,692 6,042,098 1,051,839 1,289,550 952,344 9,335,831
DRB-HICOM BERHAD
ANNUAL REPORT 2017
173
174
DRB-HICOM BERHAD
ANNUAL REPORT 2017
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 MARCH 2017 (Continued)
Non-distributable Redeemable
Convertible
Cumulative
Equity Preference
Share Merger Currency Available- Other attributable to Perpetual Shares Non-
Capital Share Reserve Translation for-sale Reserves Retained Owners of the Sukuk (“RCCPS”) controlling
(Note 34) Premium (Note 47) Differences Reserve (Note 48) Earnings Company (Note 35) (Note 36) Interest Total
Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
2017 (Continued)
Sub-total brought forward 1,740,302 - 998,074 (85,922) (1,358) 372,310 3,018,692 6,042,098 1,051,839 1,289,550 952,344 9,335,831
Effect on deconsolidation of
subsidiary companies
under creditors’ voluntary
winding up - - 214,201 - - 660 (215,456) (595) - - (13,849) (14,444)
Effect of changes in
shareholding/assets in
subsidiary companies - - - 1,591 - 81,072 (11,472) 71,191 - - 299,820 371,011
Effect of change of an
associated company to a
subsidiary company - - - - - (368) 368 - - - 507,426 507,426
Transfer of subsidiary
companies’ reserves - - - - - 46,457 (46,457) - - - - -
Dividend paid to non-
controlling interest - - - - - - - - - - (22,644) (22,644)
First and final dividend in
respect of financial year
ended 31 March 2016 11 - - - - - - (38,665) (38,665) - - - (38,665)
At 31 March 2017 1,740,302 - 1,212,275 (84,331) (1,358) 500,131 2,707,010 6,074,029 1,051,839 1,289,550 1,723,097 10,138,515
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 MARCH 2017 (Continued)
Non-distributable
Equity
Share Merger Currency Available- Other attributable to Perpetual Non-
Capital Share Reserve Translation for-sale Reserves Retained Owners of the Sukuk controlling
(Note 34) Premium (Note 47) Differences Reserve (Note 48) Earnings Company (Note 35) Interest Total
Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
2016 (Restated)
At 1 April 2015 1,719,601 20,701 1,000,039 (92,529) (814) 324,688 4,598,808 7,570,494 822,291 959,290 9,352,075
At 31 March 2016 1,719,601 20,701 1,000,039 (43,631) 6,749 367,638 3,471,128 6,542,225 1,051,859 908,359 8,502,443
The notes set out on pages 182 to 350 form an integral part of the financial statements.
The notes set out on pages 21 to 189 form an integral part of the financial statements.
DRB-HICOM BERHAD
ANNUAL REPORT 2017
175
176
COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 MARCH 2017
2017
At 1 April 2016 1,719,601 20,701 2,318,321 1,365,468 5,424,091 1,051,859 6,475,950
Transfer of share premium on 31 January 2017 20,701 (20,701) - - - - -
Net profit for the financial year representing total comprehensive income
for the financial year - - - 276,864 276,864 79,655 356,519
Transactions with Owners
Distribution to holders of Perpetual Sukuk - - - - - (79,675) (79,675)
First and final dividend in respect of financial year ended 31 March 2016 11 - - - (38,665) (38,665) - (38,665)
2016
At 1 April 2015 1,719,601 20,701 2,318,321 1,918,601 5,977,224 822,291 6,799,515
Net (loss)/profit for the financial year representing total comprehensive
(loss)/income for the financial year - - - (466,137) (466,137) 76,865 (389,272)
Transactions with Owners
Net issuance of Perpetual Sukuk - - - - - 223,841 223,841
Distribution to holders of Perpetual Sukuk - - - - - (71,138) (71,138)
Final dividend in respect of financial year ended 31 March 2015 11 - - - (86,996) (86,996) - (86,996)
The notes set out on pages 182 to 350 form an integral part of the financial statements.
The notes set out on pages 21 to 189 form an integral part of the financial statements.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 177
STATEMENTS OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2017
Group Company
2017 2016 2017 2016
(Restated)
RM’000 RM’000 RM’000 RM’000
Net (loss)/profit for the financial year (260,402) (871,621) 356,519 (389,272)
Adjustments for non-cash items:
Allowance for financing of customers 75,778 68,165 - -
Allowance for doubtful debts (net of write backs):
- trade and other receivables 55 24,006 18 -
- project development receivables - 120,500 - -
Amortisation of:
- concession assets 11,819 12,182 - -
- intangible assets 231,386 178,579 - -
- prepaid lease properties 1,393 1,388 - -
Depreciation of property, plant and equipment 667,640 544,742 251 252
Finance costs 370,905 382,094 158,708 151,215
Financing written off 1,689 18,321 - -
Impairment loss of (net):
- intangible assets 55,593 81,473 - -
- investment in subsidiary companies - - 360,154 581,000
- investment in an associated company - - 2,900 530
- investment securities: available-for-sale 16,899 22,825 - -
- property, plant and equipment 8,049 4,355 - -
Inventories written off/down (net of write backs) 17,730 29,659 - -
Loss on re-measurement of the previously
held equity interest in an associated
company at its acquisition-date fair value 130,221 - - -
Provision for concession assets 34,967 31,941 - -
Provision for liabilities and charges (net) 61,218 284,105 - -
Taxation 38,218 49,491 2,297 2,698
Unrealised foreign exchange differences (net) 81,915 (32,996) - -
Write off of:
- intangible assets 71,348 - - -
- property, plant and equipment 3,729 2,805 - -
Amortisation of deferred income (79,125) (59,361) - -
Dividend income:
- subsidiary companies - - (695,159) (182,600)
- joint venture - - (797) (468)
- associated companies - - (110,296) (152,713)
- other investment (1,328) - - -
Sub-total carried forward 1,539,697 892,653 74,595 10,642
DRB-HICOM BERHAD
178 ANNUAL REPORT 2017
STATEMENTS OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2017
(Continued)
Group Company
2017 2016 2017 2016
(Restated)
RM’000 RM’000 RM’000 RM’000
CASH FLOWS FROM OPERATING
ACTIVITIES (Continued)
STATEMENTS
STATEMENTS OF
OF CASH
CASH FLOWS
FLOWS FOR
FOR THE
THE FINANCIAL
FINANCIAL YEAR
YEAR ENDED
ENDED 31
31 MARCH
MARCH 2017
2017
(Continued)
(Continued)
Group
Group Company
Company
2017
2017 2016
2016 2017
2017 2016
2016
(Restated)
(Restated)
RM’000
RM’000 RM’000
RM’000 RM’000
RM’000 RM’000
RM’000
CASH
CASH FLOWS
FLOWS FROM
FROM OPERATING
OPERATING
ACTIVITIES
ACTIVITIES (Continued)
(Continued)
Sub-total
Sub-total brought
brought forward
forward 399,276
399,276 130,752
130,752 8,327
8,327 109,161
109,161
Interest
Interest received
received 57,102
57,102 51,024
51,024 8,930
8,930 6,268
6,268
Dividends
Dividends received
received from:
from:
-- subsidiary
subsidiary companies
companies -- -- 695,159
695,159 182,600
182,600
-- joint
joint ventures
ventures 39,281
39,281 18,556
18,556 797
797 468
468
-- associated
associated companies
companies 134,557
134,557 167,061
167,061 110,296
110,296 152,713
152,713
-- other
other investment
investment 1,328
1,328 -- -- --
Finance
Finance costs
costs paid
paid (355,518)
(355,518) (378,804)
(378,804) (150,844)
(150,844) (145,521)
(145,521)
Taxation
Taxation refunds/(paid),
refunds/(paid), net
net 49,133
49,133 (42,512)
(42,512) (339)
(339) 41,071
41,071
Provision
Provision for
for liabilities
liabilities and
and charges
charges paid
paid (153,201)
(153,201) (83,927)
(83,927) -- --
Deferred
Deferred income
income received
received 95,873
95,873 53,151
53,151 -- --
Post-employment
Post-employmentbenefit
benefitobligations
obligations paid
paid (14,880)
(14,880) (12,502)
(12,502) -- --
Provision
Provision for
for concession
concession assets
assets paid
paid (20,987)
(20,987) (3,599)
(3,599) -- --
Net
Net cash
cash inflow/(outflow)
inflow/(outflow) from
from operating
operating
activities
activities 231,964
231,964 (100,800)
(100,800) 672,326
672,326 346,760
346,760
CASH
CASH FLOWS
FLOWS FROM
FROM INVESTING
INVESTING
ACTIVITIES
ACTIVITIES
Acquisitions
Acquisitions of
of investment
investment securities
securities by
by aa
banking subsidiary
banking subsidiary company
company (8,931,887)
(8,931,887) (6,561,266)
(6,561,266) -- --
Acquisition/subscription
Acquisition/subscription of
of additional
additional shares
shares
in
in aa subsidiary
subsidiary company
company (46)
(46) -- -- (2,056)
(2,056)
Additional
Additional cost
cost incurred
incurred for
for land
land held
held for
for
property
property development
development -- (657)
(657) -- --
Additional/new
Additional/newinvestment
investment in
in aa joint
joint venture/
venture/
an associated
an associated company
company (32,252)
(32,252) (70,752)
(70,752) -- --
Capital
Capital repayment
repayment to to non-controlling
non-controlling
interest of
interest of aa subsidiary
subsidiary company
company -- (86,460)
(86,460) -- --
Capital
Capital repayment
repayment by
by an
an associated
associated
company
company 7,200
7,200 -- 7,200
7,200 --
Maturity
Maturity of
of investment
investment securities
securities 84,206
84,206 -- -- --
Movement
Movement in in fixed
fixed deposits
deposits placement
placement with
with
maturity profile
maturity profile more
more than
than 33 months
months 25,154
25,154 (11,091)
(11,091) 10,570
10,570 (972)
(972)
Net
Net cash
cash inflow/(outflow)
inflow/(outflow) from
from acquisitions
acquisitions
of subsidiary
of subsidiarycompanies
companies 607,037
607,037 (102,627)
(102,627) -- (19,568)
(19,568)
Net
Net cash
cash inflow
inflowfrom
from disposals
disposals of
of subsidiary
subsidiary
companies
companies 496,623
496,623 -- -- --
Sub-total
Sub-total carried
carried forward
forward (7,743,965)
(7,743,965) (6,832,853)
(6,832,853) 17,770
17,770 (22,596)
(22,596)
DRB-HICOM BERHAD
180 ANNUAL REPORT 2017
STATEMENTS
STATEMENTS OF
OF CASH
CASH FLOWS
FLOWS FOR
FOR THE
THE FINANCIAL
FINANCIAL YEAR
YEAR ENDED
ENDED 31
31 MARCH
MARCH 2017
2017
(Continued)
(Continued)
Group
Group Company
Company
2017
2017 2016
2016 2017
2017 2016
2016
(Restated)
(Restated)
RM’000
RM’000 RM’000
RM’000 RM’000
RM’000 RM’000
RM’000
CASH
CASH FLOWS
FLOWS FROM
FROM INVESTING
INVESTING
ACTIVITIES (Continued)
ACTIVITIES (Continued)
Sub-total
Sub-total brought
brought forward
forward (7,743,965)
(7,743,965) (6,832,853)
(6,832,853) 17,770
17,770 (22,596)
(22,596)
Net
Net cash
cash outflow
outflow from
from deconsolidation
deconsolidation of
of
subsidiary
subsidiary companies
companies (53)
(53) -- -- --
Proceeds
Proceeds from
from disposals
disposals of
of investment
investment
securities by
securities by aa banking
banking subsidiary
subsidiary
company
company 7,944,507
7,944,507 6,800,089
6,800,089 -- --
Proceeds
Proceeds from
from disposals
disposals ofof property,
property, plant
plant
and equipment/investment
and equipment/investment
properties/intangible assets/other
properties/intangible assets/other
assets/assets held
assets/assets held for
for sale
sale 91,728
91,728 91,821
91,821 11,300
11,300 --
Purchases
Purchases of
of property,
property, plant
plant and
and
equipment/prepaid
equipment/prepaid lease
lease
properties/investment
properties/investment
properties/intangible
properties/intangible assets
assets (818,735)
(818,735) (1,108,504)
(1,108,504) (41)
(41) (173)
(173)
Redemptions
Redemptions of
of investment
investment securities
securities by
by aa
banking subsidiary
banking subsidiary company
company 578,718
578,718 473,000
473,000 -- --
Redemption
Redemption of
of preference
preference shares
shares by
by aa joint
joint
venture
venture 5,000
5,000 5,000
5,000 -- --
Net
Net cash
cash inflow/(outflow)
inflow/(outflow) from
from investing
investing
activities
activities 57,200
57,200 (571,447)
(571,447) 29,029
29,029 (22,769)
(22,769)
CASH
CASH FLOWS
FLOWS FROM
FROM FINANCING
FINANCING
ACTIVITIES
ACTIVITIES
Bank
Bank balances
balances in
in Escrow
Escrow account
account arising
arising
from
from Redeemable
Redeemable Convertible
Convertible Cumulative
Cumulative
Preference Shares
Preference Shares (“RCCPS”)
(“RCCPS”) (3,019)
(3,019) -- -- --
Dividends
Dividends paid
paid to
to non-controlling
non-controlling interest
interest (22,644)
(22,644) (10,334)
(10,334) -- --
Dividends
Dividends paid
paid to
to shareholders
shareholders (38,665)
(38,665) (115,995)
(115,995) (38,665)
(38,665) (115,995)
(115,995)
Distribution
Distribution paid
paid to
to holders
holders of
of Perpetual
Perpetual
Sukuk
Sukuk (79,675)
(79,675) (71,138)
(71,138) (79,675)
(79,675) (71,138)
(71,138)
Movement
Movement inin fixed
fixed deposits
deposits held
held as
as
security/sinking
security/sinking fund
fund 187,893
187,893 39,646
39,646 -- --
Net
Net proceeds
proceeds from
from issuance
issuance of
of RCCPS
RCCPS 1,248,865
1,248,865 -- -- --
Net
Net proceeds
proceeds from
from issuance
issuance of
of Perpetual
Perpetual
Sukuk
Sukuk -- 223,841
223,841 -- 223,841
223,841
Proceeds
Proceeds from
from bank
bank borrowings
borrowings 5,229,103
5,229,103 4,799,928
4,799,928 330,000
330,000 86,500
86,500
Repayment
Repayment ofof borrowings/hire
borrowings/hire purchase
purchase
and
and finance
finance leases
leases (5,732,849)
(5,732,849) (4,833,443)
(4,833,443) (658,037)
(658,037) (621,023)
(621,023)
Loans
Loans from
from subsidiary
subsidiary companies
companies (net
(net of
of
repayment)
repayment) -- -- (238,373)
(238,373) 38,163
38,163
Net
Net cash
cash inflow/(outflow)
inflow/(outflow) from
from financing
financing
activities
activities 789,009
789,009 32,505
32,505 (684,750)
(684,750) (459,652)
(459,652)
DRB-HICOM BERHAD
ANNUAL REPORT 2017 181
STATEMENTS OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2017
(Continued)
Group Company
2017 2016 2017 2016
(Restated)
Note RM’000 RM’000 RM’000 RM’000
NET INCREASE/(DECREASE) IN CASH
AND CASH EQUIVALENTS 1,078,173 (639,742) 16,605 (135,661)
Effects of foreign currency translation (270) 19,838 - -
CASH AND CASH EQUIVALENTS
AT BEGINNING OF THE FINANCIAL
YEAR 1,945,062 2,564,966 240,331 375,992
The notes set out on pages 182 to 350 form an integral part of the financial statements.
The notes set out on pages 21 to 189 form an integral part of the financial statements.
DRB-HICOM BERHAD
182 ANNUAL REPORT 2017
1 CORPORATE INFORMATION
The Company is an investment holding company with investments in the automotive (including
defence and composite manufacturing), services (including integrated logistics, banking and
postal businesses) and property, asset and construction segments. There was no significant
change in these activities during the financial year.
The principal activities of the subsidiary companies, joint ventures and associated companies
are described in Note 3.
The Directors regard Etika Strategi Sdn. Bhd., a company incorporated in Malaysia, as the
holding company.
The Company is a public limited liability company, incorporated and domiciled in Malaysia, and
listed on the Bursa Malaysia Securities Berhad.
The address of the registered office and principal place of business of the Company is Level 5,
Wisma DRB-HICOM, No. 2, Jalan Usahawan U1/8, Seksyen U1, 40150 Shah Alam, Selangor
Darul Ehsan, Malaysia.
The following accounting policies, unless otherwise stated below, have been used consistently in
dealing with items which are considered material in relation to the financial statements:
The financial statements comply with the provisions of the Companies Act 2016 and
Financial Reporting Standards (“FRSs”) in Malaysia.
The financial statements of the Group and of the Company are prepared under the
historical cost convention except for those that are disclosed in this summary of
significant accounting policies.
The comparatives for 31 March 2016 have been restated with adjustments arising from
the completion of the purchase price allocation exercise as disclosed in Note 51(i)(f).
Certain other comparatives have been reclassified to be consistent with current year’s
presentation.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 183
2.2 Changes in accounting policies and effects arising from adoption of new/revised
and amendments to FRSs
(i) Changes in accounting policies and effects for the current financial year
The adoption of the above standards and amendments did not result in material
impact to the financial statements of the Group and of the Company.
On 28 October 2015, MASB has announced to defer the effective date for
transitioning entities to apply the MFRS Framework to annual periods beginning
on or after 1 January 2018. Therefore, the Group as a transitioning entity will
have to adopt the MFRS Framework for annual periods beginning on or after 1
January 2018.
The Group and the Company have not adopted the following published new/amended
standards that are applicable to the Group and the Company beginning on or after 1 April
2017.
The Group and the Company are currently assessing the impact of the adoption and
application of the above new/amended standards.
DRB-HICOM BERHAD
184 ANNUAL REPORT 2017
The consolidated financial statements include the financial statements of the Company
and its subsidiary companies made up to the end of the financial year. Consistent
accounting policies are applied to like transactions and events in similar circumstances.
Subsidiary companies are those companies in which the Group has the following policies:
(i) Control exists when the Group has existing rights that give it the current ability to
the activities
direct the activities that
that significantly
significantly affect
affectinvestee’s
investee’s returns,
returns, the the Group
Group is is
exposed, or has rights, to variable returns from its involvement with the entity and
has the ability to affect those returns through its power over the entity.
(ii) Potential voting rights are considered when assessing control only when such
rights are substantive.
(iii) The Group considers it has de facto power over an investee when, despite not
having the majority of voting rights, it has the current ability to direct the activities
of the investee that significantly affect the investee’s return.
All the subsidiary companies are consolidated using the purchase method of accounting
where the results of subsidiary companies acquired or disposed off during the financial
year are included from the date on which control is transferred to the Group and are no
longer consolidated from the date on which the control ceases. At the date of acquisition,
the fair
fair values
valuesofofthe
the subsidiary
subsidiary companies’
companies’ identifiable
identifiable assets
assets acquired
acquired and liabilities
and liabilities and and
contingent liabilities assumed are determined and these values are reflected in the
consolidated financial statements. The cost of an acquisition is measured at fair value of
assets given, equity instruments issued and liabilities incurred or assumed at the date of
exchange. Acquisition-related costs are expensed.
The total assets and liabilities of subsidiary companies are included in the consolidated
statement of financial position and the interests of non-controlling shareholders in the net
assets are stated separately. Losses within a subsidiary company are attributed to the
non-controlling interest even if that results in a deficit balance. All significant inter-
company transactions, balances and unrealised gains on transactions are eliminated on
consolidation and unrealised losses on transactions are also eliminated after considering
impairment indicators, only to the extent that cost can be recovered.
Changes in
Changes in the
theGroup’s
Group’sowne rshipinterests
ownership interestsin in subsidiary
subsidiary companies
companies thatthat do not
do not result
result in
in the
the Group
Group losinglosing
controlcontrol
over theover the subsidiary
subsidiary companies companies are accounted
are accounted for as equityfor as equity
transactions.
The carrying amounts
transactions. of the
The carrying Group’sofinterests
amounts and the
the Group’s non-controlling
interests a nd interest are adjusted
the non-controlling
to reflectare
interest the adjusted
changes to
in reflect
their relative interestsinintheir
the changes the subsidiary companies.
relative interests The
in the resulting
subsidiary
difference
companies. is recognised directly
The resulting in equityisand
difference attributed to
recognised Ownersinofequity
directly the Company.
and attributed to
Owners of the Company.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 185
When the Group loses control of a subsidiary company, it derecognises the related
assets (including goodwill), liabilities, non-controlling interest and other components of
equity, while any resultant gain or loss is recognised in profit or loss. The gain or loss on
disposal of a subsidiary company is the difference between net disposal proceeds and
the Group’s share of its net assets including the cumulative amount of any currency
exchange differences that relate to the subsidiary company and is recognised in profit or
loss. The subsidiary company’s cumulative gain or loss which has been recognised in
other comprehensive income and accumulated in equity are reclassified to profit or loss
or where applicable, transferred directly to retained earnings. The fair value of any
investment retained in the former subsidiary company at the date that control is lost is
regarded as the cost on initial recognition of the investment.
Non-controlling interest represents the portion of profit or loss and net assets in
subsidiary companies not held by the Group and are presented separately in statements
of comprehensive income of the Group and within equity in the consolidated statement of
financial position separately from parent shareholders’ equity. Non-controlling interest is
initially measured at the non-controlling interest’s share of fair values of the identifiable
assets and liabilities of the acquiree at the date of acquisition.
The considerations made in determining joint control or significant influence are similar to
those necessary to determine control over subsidiary companies. The Group’s share of
results of joint ventures and associated companies are included in the consolidated
statement of comprehensive income using the equity method of accounting.
DRB-HICOM BERHAD
186 ANNUAL REPORT 2017
In the consolidated statement of financial position, the Group’s interest in joint ventures
and associated companies is stated at cost plus the Group’s share of post-acquisition
retained profits and reserves less impairment. Any change in other comprehensive
income (“OCI”) of those investees is presented as part of the Group’s OCI. In addition,
when there has been a change recognised directly in the equity of the joint venture or
associated company, the Group recognises its share of any changes, when applicable, in
the statement of changes in equity.
The share of the results of the joint venture and the associated company will not be taken
into the Group’s statement of comprehensive income when the carrying value of the
investment in joint venture and associated company reaches zero unless the Group has
incurred obligations or guaranteed obligations in respect of the joint venture and the
associated company.
Profits and losses resulting from transactions between the Group and its joint venture and
associated company are recognised in the Group’s financial statements only to the extent
of unrelated investors’ interests in the joint venture and associated company. Unrealised
losses are eliminated unless the transaction provides evidence of an impairment of the
asset transferred.
The financial statements of the joint ventures and the associated companies used in the
preparation of the consolidated financial statements are prepared for the same reporting
date as the Group. When the reporting dates of the joint ventures and the associated
companies are different from the Group, the joint venture and the associated company
are required to prepare additional financial statements as of the same date as that of the
Group for consolidation purpose. Where necessary, adjustments are made to the
financial statements of joint ventures and associated companies to ensure consistency of
accounting policies with those of the Group.
The Group’s joint ventures and associated companies are listed in Note 3.
On disposal of investments, the difference between the net disposal proceeds and its
carrying amount is charged or credited to profit or loss.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 187
Financial assets are recognised in the statements of financial position when, and only
when, the Group and the Company become a party to the contractual provisions of the
financial instruments.
When financial assets are recognised initially, they are measured at fair value, plus in the
case of financial assets not at fair value through profit or loss, directly attributable
transaction costs.
The Group and the Company determine the classification of their financial assets at the
initial recognition, and the categories include financial assets at fair value through profit or
loss, loans and receivables, held-to-maturity investments and available-for-sale financial
assets.
Financial assets are classified as financial assets at fair value through profit or
loss if they are held for trading or are designated as such upon initial recognition.
Financial assets held for trading are derivatives (including separated embedded
derivatives unless they are designated as effective hedging instruments as
defined by FRS 139) or financial assets acquired principally for the purpose of
selling in the near term.
Financial assets at fair value through profit or loss could be presented as current
or non-current. Financial assets that are held primarily for trading purposes are
presented as current whereas financial assets that are not held primarily for
trading purposes are presented as current or non-current based on the
settlement date.
Financial assets with fixed or determinable payments that are not quoted in an
active market are classified as loans and receivables.
Loans and receivables are classified as non-current assets, except for those
having maturity within 12 months after the reporting date which are classified as
current.
DRB-HICOM BERHAD
188 ANNUAL REPORT 2017
Financial assets with fixed or determinable payments and fixed maturity are
classified as held-to-maturity when the Group has the positive intention and
ability to hold the investment to maturity.
A financial asset is derecognised where the contractual right to receive cash flows from
the asset has expired. On derecognition of a financial asset in its entirety, the difference
between the carrying amount and the sum of the consideration received and any
cumulative gain or loss that had been recognised in other comprehensive income is
recognised in profit or loss.
Regular way purchases or sales are purchases or sales of financial assets that require
delivery of assets within the period generally established by regulation or convention in
the marketplace concerned. All regular way purchases and sales of financial assets are
recognised or derecognised on the trade date i.e., the date that the Group and the
Company commit to purchase or sell the asset.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 189
The Group and the Company assess at each reporting date whether there is any
objective evidence that a financial asset is impaired.
(i) Trade and other receivables and other financial assets carried at amortised
cost
If any such evidence exists, the amount of impairment loss is measured as the
difference between the asset’s carrying amount and the present value of
estimated future cash flows discounted at the financial asset’s original effective
interest rate. The impairment loss is recognised in profit or loss.
The carrying amount of the financial asset is reduced by the impairment loss
directly for all financial assets with the exception of trade receivables, where the
carrying amount is reduced through the use of an allowance account. When a
trade receivable becomes uncollectible, it is written off against the allowance
account.
If in a subsequent period, the amount of the impairment loss decreases and the
decrease can be related objectively to an event occurring after the impairment
was recognised, the previously recognised impairment loss is reversed to the
extent that the carrying amount of the asset does not exceed its amortised cost at
the reversal date. The amount of reversal is recognised in profit or loss.
The banking subsidiary company assesses at each reporting date whether there
is any objective evidence that a financing is impaired. Financing of banking
subsidiary company is classified as impaired when they fulfil either of the
following criteria:
(a) principal or profit or both are past due for 3 months or more;
(b) where financing in arrears for less than 3 months, the financing exhibit
indications of credit deterioration and weaknesses, whether or not
impairment loss has been provided for; or
If there is objective evidence that an impairment loss has been incurred, the
amount of the loss is measured as the difference between the financing’s
carrying amount and the present value of estimated future cash flows
discounted at the financing’s original effective profit rate. The carrying amount
of the financing is reduced through the use of an allowance account and the
amount of the loss is recognised in the profit or loss.
Financings which are not individually significant and financings that have been
individually assessed with no evidence of impairment loss are grouped together
for collective impairment assessment. These financings are grouped within
similar credit risk characteristics for collective assessment, whereby data from the
financing portfolio (such as, credit quality, levels of arrears, credit utilisation,
financing to collateral ratios, etc.), concentration of risks, and economic data are
taken into consideration.
Future cash flows in a group of financing that are collectively evaluated for
impairment are estimated based on the historical loss experience of the banking
subsidiary company. Historical loss experience is adjusted on the basis of current
observable data to reflect the effects of current conditions that did not affect the
period on which the historical loss experience is based, and to remove the effects
of conditions in the historical period that do not currently exist.
Financial assets and financial liabilities are offset and the net amount presented in the
statements of financial position when there is a legally enforceable right to offset the
recognised amount and there is an intention to settle on a net basis, or realise the
receivables and settle the payables simultaneously.
Investment properties comprise land and buildings that are held for long term rental yield
and/or for capital appreciation and that are not occupied by the companies in the Group.
Assets under construction/development for future use as investment property are also
classified in this category. Investment properties are initially measured at cost, including
transaction cost. Subsequent to initial recognition, investment properties are stated at fair
value, representing open-market values determined annually by independent qualified
valuer. Fair value is based on active market prices, adjusted, if necessary, for any
difference in the nature, location or condition of the specific asset. Gains or losses arising
from changes in the fair values of investment properties are included in profit or loss in
the year in which they arise.
DRB-HICOM BERHAD
192 ANNUAL REPORT 2017
Transfers are made to or from investment property only when there is a change in use.
For a transfer from investment property to owner-occupied property, the deemed cost for
subsequent accounting is the fair value at the date of change in use. For a transfer from
owner-occupied property to investment property, the property is accounted for in
accordance with the accounting policy for property, plant and equipment set out in Note
2.14 up to the date of change in use.
Assets are classified as held for sale and stated at the lower of carrying amount and fair
value less costs to sell if their carrying amount will be recovered principally through a sale
transaction rather than through continuing use. This condition is regarded as met only
when the sale is highly probable and the asset is available for immediate sale in its
present condition subject only to terms that are usual and customary.
A non-current asset is not depreciated or amortised while it is classified as held for sale
or while it is part of a disposal group classified as held for sale. Interest and other
expenses attributable to the liabilities of a disposal group classified as held for sale are
continued to be recognised.
Assets and liabilities classified as held for sale are presented separately as current items
in the statement of financial position.
Other assets represent transferable corporate memberships in golf and country clubs.
The golf membership acquired is measured initially at cost. Following initial recognition, it
is measured at cost less any accumulated impairment losses. Gain or loss arising from
disposal of the golf membership is measured as the difference between the net disposal
proceeds and the carrying amount and is recognised in profit or loss. The policy for the
recognition and measurement of impairment losses is in accordance with Note 2.22.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 193
Freehold land is not depreciated as it has an infinite life. Depreciation on capital work-in-
progress commences when the assets are ready for their intended use. All other
property, plant and equipment are stated at cost less accumulated depreciation and
impairment losses.
Where an indication of impairment exists, the carrying amount of the property, plant and
equipment is assessed and written down immediately to its recoverable amount. The
recoverable amount is the higher of an asset’s fair value less costs to sell and value in
use. At each reporting date, the Group and the Company assess whether there is any
indication of impairment. The policy for the recognition and measurement of impairment
losses is in accordance with Note 2.22.
Residual values and useful lives of assets are reviewed, and adjusted if appropriate, at
each reporting date.
Concession assets arise from the right to charge users of the public services and are
amortised over the period of 22 years under the Service Concession Agreement.
Subsequent costs and expenditures related to infrastructure and equipment arising from
the commitments to the concession contracts or that increase future revenue is
recognised as additions to the concession assets and are stated at cost. All other
repairs and maintenance expenses that are routine in nature, are charged to profit or
loss during the financial year in which they are incurred.
DRB-HICOM BERHAD
194 ANNUAL REPORT 2017
Leasehold land that normally has a finite economic life and title is not expected to pass
to the lessee by the end of the lease term is treated as an operating lease, if the risks
and rewards of the ownership are not substantially transferred to the Group. The
payment made on entering into or acquiring a leasehold land is accounted as prepaid
lease properties that are amortised over the lease term in accordance with the pattern
of benefits provided. Short term leases are below 50 years and long term leases are 50
years and above at the date of initial recognition.
2.17 Goodwill
Goodwill represents the excess of the cost of acquisition of subsidiary companies, joint
ventures and associated companies over the fair value of the Group’s share of the
identifiable net assets at the time of acquisition. Goodwill on acquisitions of subsidiary
companies is included in the consolidated statement of financial position as intangible
assets. If the cost of acquisition is less than the fair value of the net assets of the
subsidiary company acquired, the difference is recognised directly in profit or loss.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The
allocation is made to those cash-generating units or groups of cash-generating units
that are expected to benefit from the synergies of the business combination in which the
goodwill arose. The Group allocates goodwill to each business segment in which it
operates.
Intangible assets acquired separately are measured initially at cost. Following initial
recognition, intangible assets are measured at cost less any accumulated amortisation
and accumulated impairment losses.
Costs that are directly associated with identifiable and unique software products
which have probable benefits exceeding the cost beyond 1 year are recognised
as intangible assets. Expenditure which enhances or extends the performance
of computer software programmes beyond their original specifications is
recognised as a capital movement and added to the original cost of the
software.
(b) Management’s intention to complete the intangible asset for use or sale;
(d) It can be demonstrated that the intangible asset will generate probable
future economic benefits;
These intangible assets comprise dealership network and brand name arising
from the acquisition of PROTON.
Where an indication of impairment exists, the carrying amount of the intangible assets is
assessed and written down immediately to its recoverable amount. The policy for the
recognition and measurement of impairment losses is in accordance with Note 2.22.
Preliminary and pre-operating expenses are written off to profit or loss in the financial
year in which they are incurred.
Cost associated with the acquisition of land includes the purchase price of the
land, professional fees, stamp duties, conversion fees and other relevant levies.
Where an indication of impairment exists, the carrying amount of the asset is
assessed and written down immediately to its recoverable amount.
On disposal of land held for property development, the difference between the
net disposal proceeds and its carrying amount is charged or credited to profit or
loss.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 197
Property development costs comprise all costs that are directly attributable to
development activities or that can be allocated on a reasonable basis to such
activities.
2.20 Inventories
Inventories are stated at the lower of cost and net realisable value.
Cost is defined as all costs of purchase, costs of conversion and other costs incurred in
bringing the inventories to their present location and conditions. Costs of purchase
comprise the purchase price, import duties and other taxes (so far as not recoverable
from the taxation authorities), transport and handling costs and other directly
attributable costs.
The cost of unsold properties comprises cost associated with the acquisition of
land, direct costs and an appropriate allocation of allocated costs attributable to
property development activities.
Net realisable value is the estimated selling price in the ordinary course of business less
the costs of completion and selling expenses.
For the purposes of the statements of cash flows, cash and cash equivalents consist of
cash in hand, bank balances, demand deposits, bank overdrafts and short term highly
liquid investments with a maturity of three months or less from the date of placement
that are readily convertible to known amounts of cash and which are subject to an
insignificant risk of changes in value.
The Group and the Company assess, at each reporting date, whether there is an
indication that an asset may be impaired. If any indication exists, or when annual
impairment testing for an asset is required, the Group and the Company estimate the
asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s
or cash-generating unit’s (“CGU”) fair value less costs of disposal and its value in use.
Recoverable amount is determined for an individual asset, unless the asset does not
generate cash inflows that are largely independent of those from other assets or groups
of assets. When the carrying amount of an asset or CGU exceeds its recoverable
amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset. In determining fair value
less costs of disposal, recent market transactions are taken into account. If no such
transactions can be identified, an appropriate valuation model is used. These
calculations are corroborated by valuation multiples, quoted share prices for publicly
traded companies or other available fair value indicators.
Income tax on the profit or loss for the financial year comprises current and deferred
tax.
Current tax is the expected amount of income taxes payable in respect of the
taxable profit for the financial year and is measured using the tax rates that
have been enacted at the reporting date. Current taxes are recognised in profit
or loss except to the extent that the tax relates to items recognised outside
profit or loss, either in other comprehensive income or directly in equity.
Deferred tax is provided for in full, using the liability method on temporary
differences at the reporting date between the tax bases of assets and liabilities
for tax purposes and their carrying amounts in the financial statements.
Deferred tax is not recognised if the temporary difference arises from the initial
recognition of goodwill, an asset or liability in a transaction which is not a
business combination and at the time of the transaction, affects neither
accounting profit nor taxable profit.
The carrying amount of deferred tax assets is reviewed at each reporting date
and reduced to the extent that it is no longer probable that sufficient taxable
profit will be available to allow all or part of the deferred tax asset to be utilised.
Unrecognised deferred tax assets are reassessed at each reporting date and
are recognised to the extent that it is probable that taxable profit will be
available against which the deductible temporary differences, unused tax losses
and unused tax credits can be utilised.
Deferred tax is measured at the tax rates that are expected to apply in the
period when the asset is realised or the liability is settled, based on tax rates
that have been enacted or substantially enacted at the reporting date. Deferred
tax is recognised in profit or loss, except when it arises from a transaction
which is recognised directly in equity, in which case the deferred tax is also
charged or credited directly in equity, or when it arises from a business
combination that is an acquisition, in which case the deferred tax is included in
the resulting goodwill.
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable
right exists to set off current tax assets against current tax liabilities and the
deferred taxes relate to the same taxable entity and the same taxation
authority.
DRB-HICOM BERHAD
200 ANNUAL REPORT 2017
(i) Classification
Incremental external costs directly attributable to the issue of new shares are
shown in equity as a deduction, net of tax, from the proceeds.
2.25 Borrowings
(i) Classification
Borrowings are measured at fair value net of transaction costs initially and
subsequently, at amortised cost using the effective interest method. Any
difference between the proceeds (net of transaction costs) and the redemption
value is recognised in profit or loss over the repayment period of the
borrowings.
Financial liabilities are recognised in the statement of financial position when, and only
when, the Group and the Company become a party to the contractual provisions of the
financial instrument. Financial liabilities are classified as either financial liabilities at fair
value through profit or loss or other financial liabilities.
Financial liabilities at fair value through profit or loss include financial liabilities
held for trading and financial liabilities designated upon initial recognition as at
fair value through profit or loss.
Financial liabilities held for trading include derivatives entered into by the Group
and the Company that do not meet the hedge accounting criteria. Derivative
liabilities are initially measured at fair value and subsequently stated at fair
value, with any resulting gains or losses recognised in profit or loss. Net gains
or losses on derivatives include exchange differences.
The Group’s and the Company's other financial liabilities include trade and
other payables, loans and borrowings, deposits from customers, deposits and
placements of banks and financial institutions, bills and acceptances payable
and other liabilities.
Trade and other payables are recognised initially at fair value plus directly
attributable transaction costs and subsequently measured at amortised cost
using the effective interest method.
Loans and borrowings are recognised at fair value net of transaction costs
initially and subsequently, at amortised cost using the effective interest method.
Borrowings are classified as current liabilities unless the Group has an
unconditional right to defer settlement of the liability for at least 12 months after
the reporting date.
Bills and acceptances payable represent the banking subsidiary company’s own
bills and acceptances rediscounted and outstanding in the market.
For other financial liabilities, gains and losses are recognised in profit or loss
when the liabilities are derecognised, and through the amortisation process.
A financial liability is derecognised when the obligation under the liability is extinguished.
When an existing financial liability is replaced by another from the same lender on
substantially different terms, or the terms of an existing liability are substantially
modified, such an exchange or modification is treated as a derecognition of the original
liability and the recognition of a new liability, and the difference in the respective carrying
amounts is recognised in profit or loss.
DRB-HICOM BERHAD
202 ANNUAL REPORT 2017
A financial guarantee contract is a contract that requires the issuer to make specified
payments to reimburse the holder for a loss it incurs because a specified debtor fails to
make payment when due.
Financial guarantee contracts are recognised initially as a liability at fair value, net of
transaction costs. Subsequent to initial recognition, financial guarantee contracts are
recognised as income in profit or loss over the period of the guarantee. If the debtor fails
to make payment relating to financial guarantee contract when it is due and the
Company, as the issuer, is required to reimburse the holder for the associated loss, the
liability is measured at the higher of the best estimate of the expenditure required to
settle the present obligation at the reporting date and the amount initially recognised
less cumulative amortisation.
2.28 Provisions
A provision is made for the estimated liability on all products under warranty
and provision for sales returns is made for estimated returns of goods as at the
reporting date. These provisions are arrived at based on the historical data of
service and sales returns.
In the normal course of business, the Group may receive claims based on
contractual terms or deemed constructive obligations arising from non-
contractual actions. The Management assesses these claims based on legal
advice on such contractual terms, past constructive actions or business
relationship continuity, where deemed necessary, and recognises these claims in
the financial statements of the Group.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 203
DRB-HICOM BERHAD
(203430-W)
NOTES TO THE
(Incorporated inFINANCIAL
Malaysia) STATEMENTS - 31 MARCH 2017
2.29
2.27 Grants guarantee contract
Financial
2.28 (iii) Income grants are grants other than the above grants and recognised in the
Provisions
statements of comprehensive income where there is a reasonable assurance that
(i) the grant will
Warranty and besales
received and the Group will comply with all attached conditions.
returns
2.30 Employee benefits is made for the estimated liability on all products under warranty
A provision
and provision for sales returns is made for estimated returns of goods as at the
(i) Short termdate.
reporting employee
These benefits
provisions are arrived at based on the historical data of
service and sales returns.
Wages, salaries, paid annual leave and sick leave, bonuses, and non-monetary
(ii) benefits are accrued
Restructuring, in theseparation
mutual period in which the associated
schemes services are
and voluntary rendered
separation
by employees
scheme costsof the Group.
(iii)
(iv) Termination
Claims from benefits
suppliers
Termination
In the normalbenefits
course are payable the
of business, to an entitled
Group employee
may receive whenever
claims based the
on
employment terms
contractual has to be
or terminated
deemed before the normal
constructive retirement
obligations date orfrom
arising whennon-
the
employee accepts
contractual actions.mutual/voluntary
The Management separation
assesses in these
exchange for based
claims these on
benefits.
legal
The Group recognises termination benefits when it is demonstrably
advice on such contractual terms, past constructive actions or business committed to
either terminate the employment of current employees according to
relationship continuity, where deemed necessary, and recognises these claims in a detailed
formal
the plan without
financial possibility
statements of theof withdrawal or to provide termination benefits as a
Group.
result of an offer made to encourage voluntary redundancy.
DRB-HICOM BERHAD
204 ANNUAL REPORT 2017
Certain companies in the Group operate defined benefit plans for their eligible
employees.
The defined benefit obligation is calculated using the project unit credit method,
determined by independent actuaries are charged to the statement of
comprehensive income so as to spread the cost of pensions over the average
remaining service lives of the related employees participating in the defined
benefit plan. Assumptions were made in relation to the expected rate of salary
increases and annual discount rate.
The liability in respect of a defined benefit plan is the present value of the
defined benefit obligations at the consolidated statement of financial position
less the fair value of plan assets, together with adjustments for actuarial
gains/losses and past service. The Group determines the present value of the
defined benefit obligations with sufficient regularity such that the amounts
recognised in the financial statements do not differ materially from the amounts
that would be determined at the reporting date.
When the calculation results in a potential asset for the Group, the recognised
asset is limited to the present value of economic benefits available in the form
of any future refunds from the plan or reductions in future contributions to the
plan. To calculate the present value of economic benefits, consideration is
given to any applicable minimum funding requirements.
Net interest income or expense and other expenses relating to defined benefit
plans are recognised in profit or loss.
When the benefits of a plan are changed or when a plan is curtailed, the
resulting change in benefit that relates to past service or the gain or loss on
curtailment is recognised immediately in profit or loss. The Group recognises
gains and losses on the settlement of a defined benefit plan when the
settlement occurs.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 205
When it is probable that the total contract costs will exceed total contract revenue, the
expected loss is recognised as an expense immediately.
Contract revenue comprises the initial amount of revenue agreed in the contract and
variations in contract work, claims and incentive payments to the extent that it is
probable that they will result in revenue and they are capable of being reliably
measured.
The aggregate of the costs incurred and the profit/loss recognised on each contract is
compared against the progress billings periodically. Where costs incurred and
recognised profit (less recognised losses) exceeds progress billings, the balance is
shown as amounts due from customers on construction contracts under current assets.
Where progress billings exceed costs incurred plus recognised profit (less recognised
losses), the balance is shown as amounts due to customers on construction contracts
under current liabilities.
Lease rental payments on operating leases are charged to profit or loss in the
financial year they become payable, on a straight line basis over the lease term.
When an operating lease is terminated before the lease period has expired, any
payment required to be made to the lessor by way of penalty is recognised as
an expense in the period in which termination takes place.
Revenue and other income are recognised to the extent that it is probable that the
economic benefits will flow to the Group and the Company and the revenue and other
income can be reliably measured. Revenue and other income are measured at the fair
value of consideration received or receivables. Other than revenue and other income
recognition policies mentioned elsewhere in the summary of significant accounting
policies, set out below are other significant revenue and other income recognition
policies used by the Group and the Company:
Sales are recognised upon delivery of goods, net of sales tax, returns, discounts
and allowances and upon transfer of significant risks and rewards of ownership
of the goods to the customers.
Profit income from financing is recorded using the effective profit rate,
which is the rate that exactly discounts the estimated future cash
payments or receipts through the expected life of the financing or a
shorter period, where appropriate, to the net carrying amount of the
financing. The calculation takes into account all contractual terms of the
financing (for example, repayment options) and includes any fees or
incremental costs that are directly attributable to the instrument and are
an integral part of the effective profit rate, but not future credit losses.
For impaired financing where the value of the financing has been written
down as a result of an impairment loss, financing income continues to
be recognised using the effective profit rate, to the extent that it is
probable that the profit can be recovered.
Haulage income
(h) Fees
Tuition fees for both academic programmes and short courses are
recognised over the duration of courses. Registration and enrolment
fees are recognised upon commencement of the courses.
Revenue recognition for sale of land and development properties are described
in Note 2.19.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 209
(v) Others
Items included in the financial statements of each of the Group’s entities are
measured using the currency of the primary economic environment in which the
entity operates (the “functional currency”). The consolidated financial
statements are presented in Ringgit Malaysia (“RM”), which is the Company’s
functional and presentation currency.
Transactions in foreign currencies during the financial year are converted into
functional currency at the rates of exchange ruling on the transaction dates.
Monetary assets and liabilities in foreign currency are translated into RM at
rates of exchange approximating those ruling on the reporting date. Non-
monetary items denominated in foreign currencies that are measured at
historical cost are translated using the exchange rates as at the dates of the
initial transactions. Non-monetary items denominated in foreign currencies
measured at fair value are translated using the exchange date when fair value
was determined.
The assets and liabilities of foreign subsidiary companies that have a functional
currency other than RM (including any goodwill arising on the acquisition of a
foreign operation and any fair value adjustments to the carrying amounts of
assets and liabilities arising on the acquisition) are translated into RM at the rate
of exchange ruling at the reporting date. Income and expenses are translated at
exchange rates at the date of transactions. Exchange differences arise on
translation are taken directly to other comprehensive income.
Segment reporting is presented for enhanced assessment of the Group’s risks and
returns. Business segments provide products or services that are subject to risk and
returns that are different from those of other business segments.
Segment revenue, expense, assets and liabilities are those amounts resulting from the
operating activities of a segment that are directly attributable to the segment and the
relevant portion that can be allocated on a reasonable basis to the segment. Segment
revenue, expense, assets and liabilities are determined before intragroup balances and
intragroup transactions are eliminated as part of the consolidation process, except to
the extent that such intragroup balances and transactions are between group
enterprises within a single segment.
The Group does not recognise a contingent liability but discloses its existence in the
financial statements. A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by uncertain future events beyond the control
of the Group or a present obligation that is not recognised because it is not probable
that an outflow of resources will be required to settle the obligation. A contingent liability
also arises in the extremely rare circumstance where there is a liability that cannot be
recognised because it cannot be measured reliably.
A contingent asset is a possible asset that arises from past events whose existence will
be confirmed by uncertain future events beyond the control of the Group.
The Group does not recognise contingent assets but discloses its existence where
inflows of economic benefits are probable, but not virtually certain.
Except for lease transactions, the fair value of an asset or a liability is determined as the
price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The measurement
assumes that the transaction to sell the asset or transfer the liability takes place either in
the principal market or in the absence of a principal market, in the most advantageous
market.
For non-financial asset, the fair value measurement takes into account a market
participant’s ability to generate economic benefits by using the asset in its highest and
best use or by selling it to another market participant that would use the asset in its
highest and best use.
The Group measures fair values using the following fair value hierarchy that reflects the
significance of the inputs used in making the measurements:
(i) Level 1: Quoted market price (unadjusted) in an active market for an identical
instrument.
The Group and the Company recognise transfers between levels of the fair value
hierarchy as of the date of the event or change in circumstances that caused the
transfers.
DRB-HICOM BERHAD
212 ANNUAL REPORT 2017
The principal activities of the companies in the Group and the effective interest of the Group as at 31
March 2017 therein are shown below:
Subsidiary companies of
DRB-HICOM Berhad:
HICOM University College Sdn. 100.00 100.00 Higher educational and 31 March
Bhd. vocational training programme
Motosikal Dan Enjin Nasional 81.00 81.00 Manufacturing, assembly and 31 March
Sdn. Bhd. (“MODENAS”) distribution of motorcycles,
related spare parts and
accessories
DRB-HICOM BERHAD
ANNUAL REPORT 2017 213
Subsidiary companies of
DRB-HICOM Berhad:
(Continued)
Bank Muamalat Malaysia Berhad 70.00 70.00 Islamic banking business and 31 March
related financial services
@
* $ Pos Malaysia Berhad 53.50 32.21 Provision of postal and related 31 March
services
Media City Ventures Sdn. Bhd. 51.00 51.00 Investment holding 31 March
Subsidiary companies of
HICOM Holdings Berhad:
Subsidiary companies of
HICOM Holdings Berhad:
(Continued)
HICOM Diecastings Sdn. Bhd. 100.00 100.00 Manufacturing and supply of 31 March
diecast parts for motorcycles,
automobiles and other
applications
HICOM Polymers Industry Sdn. 100.00 100.00 Trading of mobile receptacles 31 March
Bhd.
PHN Industry Sdn. Bhd. 100.00 100.00 Manufacturing stamped metal 31 March
parts, sub-assembly of
automotive components for the
motor industry and design and
manufacturing of dies
Subsidiary companies of
HICOM Holdings Berhad:
(Continued)
Subsidiary companies of
Gadek (Malaysia) Berhad:
Subsidiary companies of
PROTON:
Proton Tanjung Malim Sdn. Bhd. 100.00 100.00 Assembly of motor vehicles 31 March
and related products
Subsidiary companies of
Lotus Advance Technologies
Sdn. Bhd.:
Subsidiary companies of
Group Lotus Plc:
*g• Lotus Engineering Co., Ltd. 100.00 100.00 Engineering consultancy 31 December
(Shanghai) services
c Lotus Engineering Limited 100.00 100.00 Engineering consultancy 31 March
services
j Lotus Cars USA Inc. 100.00 100.00 Sale and servicing of motor 31 March
vehicles
Subsidiary company of
Symphony Lotus Limited:
g
• Beijing Lotus Cars Sales Co., Ltd. 100.00 100.00 Importation and distribution 31 December
of motor vehicles and
related spare parts
Proton Properties Sdn. Bhd. 100.00 100.00 Property development and 31 March
related activities
Proton Edar Sdn. Bhd. 100.00 100.00 Sale of motor vehicles, 31 March
related spare parts and
accessories
i Proton Motors (Thailand) Company 100.00 100.00 Importation and distribution 31 March
Limited of motor vehicles and
related spare parts
DRB-HICOM BERHAD
ANNUAL REPORT 2017 219
Proton Parts Centre Sdn. Bhd. 100.00 100.00 Trading of motor vehicle 31 March
components, spare parts
and accessories
$
HICOM-Potenza Sports Cars Sdn. 100.00 100.00 Dormant 31 March
Bhd.
(under members’ voluntary
liquidation)
Lotus Cars Malaysia Sdn. Bhd. 100.00 100.00 Sale of motor vehicles, 31 March
related spare parts and
accessories
e PT Proton Edar Indonesia 100.00 100.00 Sale of motor vehicles, 31 March
related spare parts and
accessories
Subsidiary companies of
Perusahaan Otomobil Nasional
Sdn. Bhd.:
b Proton Automobiles (China) Limited 100.00 100.00 Dormant 31 March
Subsidiary company of
DRB-HICOM Northern Gateway
Sdn. Bhd.:
Subsidiary companies of
Composites Technology
Research Malaysia Sdn. Bhd.:
* CTRM Aviation Sdn. Bhd. 96.87 96.87 Aircraft composites repair, 31 March
engineering and
maintenance services
DRB-HICOM BERHAD
ANNUAL REPORT 2017 221
Subsidiary companies of
Composites Technology
Research Malaysia Sdn. Bhd.:
(Continued)
* CTRM Systems Integration Sdn. 96.87 96.87 Design, research and 31 March
Bhd. development of aircraft
avionic and the production
and marketing of market
mission systems equipment
and services
Subsidiary companies of
PUSPAKOM:
Subsidiary company of
MODENAS:
Subsidiary companies of
Bank Muamalat Malaysia
Berhad:
Muamalat Invest Sdn. Bhd. 70.00 70.00 Provision of Islamic fund 31 March
management services
Muamalat Venture Sdn. Bhd. 70.00 70.00 Islamic venture capital 31 March
*$ Pos Malaysia & Services Holdings 53.50 32.21 Investment holding 31 March
Berhad
*$ PSH Capital Partners Sdn. Bhd. 53.50 32.21 Investment holding 31 March
*$ PSH Venture Capital Sdn. Bhd. 53.50 32.21 Investment holding 31 March
*$ Datapos (M) Sdn. Bhd. 53.50 32.21 Printing and insertion of 31 March
documents for mailing
*$ Pos Digicert Sdn. Bhd. 53.50 32.21 Licensed digital certification 31 March
(formerly known as Digicert Sdn. authority
Bhd.)
*$ Pos Ar-Rahnu Sdn. Bhd. 53.50 32.21 Ar-Rahnu (Islamic pawn 31 March
broking)
*$ PSH Express Sdn. Bhd. 53.50 32.21 Air courier services and 31 March
fulfilment business
*$ Pos Asia Cargo Express Sdn. Bhd. 53.50 100.00 Provision of air cargo 31 March
(formerly known as DRB-HICOM transport
Asia Cargo Express Sdn. Bhd.)
*k$ Gading Sari Aviation Services Ltd. 53.50 100.00 Provision of aircraft leasing 31 March
services
*$ Aman Freight (Malaysia) Sdn. Bhd. 53.50 100.00 Freight and forwarding and 31 March
other related services
*$ Cougar Logistics (Malaysia) Sdn. 53.50 100.00 Freight and forwarding, 31 March
Bhd. warehousing and other
related services
*$ Diperdana Kontena Sdn. Bhd. 53.50 100.00 Leasing of vehicles and 31 March
mechanical equipment
*$ KP Asia Auto Logistics Sdn. Bhd. 53.50 100.00 Warehousing and inventory 31 March
solutions, forwarding,
shipping and transport
agent
*$ Malaysian Shipping Agencies Sdn. 53.50 100.00 Shipping agency services, 31 March
Bhd. freight and forwarding and
other related services
*$ Pengangkutan Aspacs Sdn. Bhd. 53.50 100.00 Agent for freight, 31 March
forwarding and other
related services
*$ Westport Distripark (M) Sdn. Bhd. 53.50 100.00 Business of a distribution 31 March
park
DRB-HICOM BERHAD
ANNUAL REPORT 2017 225
Subsidiary companies of
Malaysian Shipping Agencies
Sdn. Bhd.:
*$ Konsortium Logistik (Sabah) Sdn. 53.50 100.00 Forwarding and related 31 March
Bhd. services
*$ PNSL Risk Management Sdn. Bhd. 53.50 100.00 Insurance agency service 31 March
*$ Parcel Tankers Malaysia Sdn. Bhd. 27.29 51.00 Sea chartering services 31 March
DRB-HICOM BERHAD
226 ANNUAL REPORT 2017
Media City Holdings Sdn. Bhd. 51.00 51.00 Investment holding 31 March
Media City Development Sdn. Bhd. 51.00 51.00 Construction, operation and 31 March
maintenance of
infrastructure and
broadcast system
Subsidiary companies of
Intrakota Komposit Sdn. Bhd.:
* DRB-HICOM Commercial Vehicles 100.00 100.00 Sale of motor vehicles and 31 March
Sdn. Bhd. related spare parts and
accessories
DRB-HICOM BERHAD
ANNUAL REPORT 2017 227
Subsidiary company of
HICOM Premier Malaysia Sdn.
Bhd.:
*$ Euro Truck & Bus (Malaysia) Sdn. 100.00 100.00 Dormant 31 March
Bhd.
(under creditors’ voluntary
liquidation)
Subsidiary company of
Automotive Corporation
Holdings Sdn. Bhd.:
Subsidiary companies of
Comtrac Sdn. Bhd.:
Subsidiary companies of
Comtrac Sdn. Bhd.:
(Continued)
DRB-HICOM EZ-Drive Sdn. Bhd. 100.00 100.00 Provision of car rental, 31 March
leasing of passenger and
commercial vehicles
EON Auto Mart Sdn. Bhd. 100.00 100.00 Sale of motor vehicles and 31 March
related spare parts and
servicing of vehicles
Euromobil Sdn. Bhd. 100.00 100.00 Sale of motor vehicles and 31 March
related spare parts and
servicing of vehicles
HICOM Auto Sdn. Bhd. 100.00 100.00 Sale of motor vehicles and 31 March
related spare parts and
servicing of vehicles
$ Multi Automotive Service and - 100.00 Provision of emergency 31 March
Assist Sdn. Bhd. roadside vehicle assistance
and supply of auto related
products and services
DRB-HICOM BERHAD
ANNUAL REPORT 2017 229
Glenmarie Properties Sdn. Bhd. 100.00 100.00 Investment holding and 31 March
provision of management
services
* HICOM Builders Sdn. Bhd. 100.00 100.00 Civil engineering and 31 March
building construction
DRB-HICOM BERHAD
230 ANNUAL REPORT 2017
Subsidiary companies of
Glenmarie Properties Sdn.
Bhd.:
HICOM Tan & Tan Sdn. Bhd. 50.00 50.00 Dormant 31 March
Subsidiary company of
Horsedale Development
Berhad:
Subsidiary company of
HICOM-Teck See Manufacturing
Malaysia Sdn. Bhd.:
JOINT VENTURES
Joint ventures of
DRB-HICOM Berhad:
*$ Isuzu Service Center Sdn. Bhd. 73.69 - Provision of after sales 31 March
services, sale of spare
parts and automobile
workshop
Isuzu Malaysia Sdn. Bhd. 48.42 48.42 Importation, assembly and 31 March
distribution of motor
vehicles, components and
parts
DRB-HICOM BERHAD
ANNUAL REPORT 2017 233
Joint ventures of
HICOM Holdings Berhad:
* Proton Commerce Sdn. Bhd. 50.00 50.00 Providing hire purchase or 31 March
leasing facilities in respect
of the purchase or use of
PROTON and other
vehicles
Joint venture of
Horsedale Development
Berhad:
ASSOCIATED COMPANIES
Associated companies of
DRB-HICOM Berhad:
Associated companies of
HICOM Holdings Berhad:
ISUZU HICOM Malaysia Sdn. Bhd. 49.00 49.00 Manufacturing, assembly 31 March
and sale of commercial
vehicles
Associated company of
PROTON:
Associated companies of
Pos Malaysia Berhad:
*$ Elpos Print Sdn. Bhd. 21.40 12.88 General printing business 31 December
and is one of the suppliers
of the Group providing
printing services
@ All shares in these companies have been charged for bank borrowings as disclosed in Notes 38
and 44.
* These companies in the Group are audited by other firms of auditors other than Ernst & Young,
Malaysia and member firms of Ernst & Young Global.
$ The changes in the effective equity interest/reclassification of these companies in the Group are as
disclosed in Notes 51 and 52.
# Inclusive of the effective beneficial interest of 27.28% (2016: 51%) held in trust.
• Due to the local statutory regulation’s requirement, the financial year end of those subsidiary
companies incorporated in People’s Republic of China is different from the Group’s financial year
end.
As mutually agreed by respective shareholders, the financial year end of certain joint ventures and
associated companies do not coincide with the Group.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 237
4 REVENUE
4 REVENUE
Group Company
Group Company
2017 2016 2017 2016
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
RM’000 RM’000 RM’000 RM’000
Sale of goods 6,998,058 7,491,492 - -
Sale of goods 6,998,058 7,491,492 - -
Rendering of services 2,769,293 1,750,230 - -
Rendering of services 2,769,293 1,750,230 - -
Construction contracts 972,746 1,559,233 - -
Construction contracts 972,746 1,559,233 - -
Banking 1,204,160 1,202,488 - -
Banking 1,204,160 1,202,488 - -
Sale of land and development
Sale of land and development
properties 114,077 169,498 - -
properties 114,077 169,498 - -
Dividend income from subsidiary
Dividend income from subsidiary
companies, a joint venture and
companies, a joint venture and
associated companies - - 806,252 335,781
associated companies - - 806,252 335,781
Interest income from subsidiary
Interest income from subsidiary
companies - - 76,970 50,161
companies - - 76,970 50,161
Rental income from subsidiary
Rental income from subsidiary
companies and an associated
companies and an associated
company - - 14,093 13,492
company - - 14,093 13,492
12,058,334 12,172,941 897,315 399,434
12,058,334 12,172,941 897,315 399,434
5 COST OF SALES
5 COST OF SALES
Group
Group
2017 2016
2017 2016
RM’000 RM’000
RM’000 RM’000
Cost of inventories 6,789,849 7,470,088
Cost of inventories 6,789,849 7,470,088
Cost of services rendered 2,248,693 1,384,232
Cost of services rendered 2,248,693 1,384,232
Cost of construction contracts and sale of land and development
Cost of construction contracts and sale of land and development
properties 871,253 1,515,748
properties 871,253 1,515,748
Cost of banking 646,235 631,479
Cost of banking 646,235 631,479
10,556,030 11,001,547
10,556,030 11,001,547
DRB-HICOM BERHAD
238 ANNUAL REPORT 2017
Group Company
2017 2016 2017 2016
Note RM’000 RM’000 RM’000 RM’000
Inventories written
off/down (net of write
backs) 17,730 29,659 - -
Loss on re-measurement
of the previously held
equity interest in an
associated company at
its acquisition-date fair
value 130,221 - - -
Provision for concession
assets 34,967 31,941 - -
Provision for liabilities and
charges (net) 39 61,218 284,105 - -
Realised foreign exchange
differences (net) 31,483 (13,181) - -
Rental of plant and
machinery and equipment 44,836 95,867 - -
Rental of premises 122,591 114,074 - -
Research and
development expenditure:
- write off of intangible
assets 21 71,348 - - -
- others 27,501 21,481 - -
Staff costs 8 2,215,979 1,782,349 - -
Unrealised foreign
exchange differences
(net) 81,915 (32,996) - -
Write off of property, plant
and equipment 13 3,729 2,805 - -
Amortisation of deferred
income 37 (79,125) (59,361) - -
Dividend income:
- subsidiary companies - - (695,159) (182,600)
- joint venture - - (797) (468)
- associated companies - - (110,296) (152,713)
- other investment (1,328) - - -
DRB-HICOM BERHAD
240 ANNUAL REPORT 2017
Group Company
2017 2016 2017 2016
Note RM’000 RM’000 RM’000 RM’000
7 DIRECTORS’ EMOLUMENTS
Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
Non-executive Directors:
- fees 905 919 745 751
- allowances and other benefits 1,858 1,297 170 174
Executive Directors:
- salaries, bonuses, fees,
allowances and other benefits 3,429 7,918 - -
- defined contribution plan 407 445 - -
6,599 10,579 915 925
8 STAFF COSTS
Group
2017 2016
Note RM’000 RM’000
9 FINANCE COSTS
Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
Interest expense on
borrowings 356,757 374,438 154,932 146,968
Hire purchase and finance
lease charges 2,492 2,921 - -
Total interest expense 359,249 377,359 154,932 146,968
DRB-HICOM BERHAD
242 ANNUAL REPORT 2017
Group Company
2017 2016 2017 2016
Note RM’000 RM’000 RM’000 RM’000
10 TAXATION
Group Company
2017 2016 2017 2016
Note RM’000 RM’000 RM’000 RM’000
Statement of
Comprehensive Income:
Current taxation
- Malaysian tax 66,648 29,566 4,981 4,060
- Foreign tax 1,229 (70) - -
- (Over)/under provision
in respect of prior
financial year (4,737) 16,509 (2,053) (540)
63,140 46,005 2,928 3,520
Deferred taxation 22
- Current year (34,594) 37,991 (631) (822)
- Under/(over) provision
in respect of prior
financial year 9,672 (34,505) - -
(24,922) 3,486 (631) (822)
10 TAXATION (Continued)
Group Company
2017 2016 2017 2016
Note RM’000 RM’000 RM’000 RM’000
Statement of
Comprehensive Income:
(Continued)
Deferred taxation related
to other comprehensive
income 22 (3,660) 3,412 - -
Income tax is calculated at the statutory tax rate of 24% (2016: 24%) of the estimate assessable
profit for the year.
The explanation of the relationship between taxation charge and (loss)/profit before taxation is as
follows:
Group Company
2017 2016 2017 2016
(Restated)
RM’000 RM’000 RM’000 RM’000
Numerical reconciliation of
effective taxation charge
(Loss)/profit before
taxation (222,184) (822,130) 358,816 (386,574)
10 TAXATION (Continued)
The explanation of the relationship between taxation charge and (loss)/profit before taxation is as
follows: (Continued)
Group Company
2017 2016 2017 2016
(Restated)
RM’000 RM’000 RM’000 RM’000
Numerical reconciliation of
effective taxation charge
(Continued)
Group
2017 2016
RM’000 RM’000
11 DIVIDENDS
The Directors recommend the payment of a single tier first and final dividend of 1.0 sen per share
amounting to RM19,332,371 in respect of the financial year ended 31 March 2017, subject to the
approval of shareholders at the forthcoming Annual General Meeting of the Company.
The basic and diluted loss per share is calculated by dividing the Group's net loss attributable to
Owners of the Company by the number of shares in issue during the financial year.
Group
2017 2016
(Restated)
Buildings,
golf course Furniture Capital
Freehold Leasehold and Plant and Motor Office and work-in-
land land improvements machinery vehicles equipment fittings progress Total
Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
GROUP
2017
At 1 April 2016 1,121,039 116,572 2,103,072 1,372,610 275,988 217,973 52,391 448,405 5,708,050
Acquisitions of subsidiary
companies 51(i) 4,208 171,631 212,851 63,240 49,682 97,882 11,236 42,807 653,537
Disposals of subsidiary companies 52(i) - - (55) - - (133) (24) - (212)
Additions - 1,650 38,433 59,701 57,699 199,885 16,054 195,082 568,504
Disposals (3,886) (530) (7,453) (14,392) (13,957) (3,001) (1,555) (323) (45,097)
Written off 6 - - (1,989) (345) (580) (292) (198) (325) (3,729)
Depreciation 6 - (8,164) (128,510) (313,079) (69,990) (121,538) (26,359) - (667,640)
(Impairment losses)/reversal of
impairment 6 - (22) (3,333) (862) (14) 24 (121) (3,721) (8,049)
Currency translation differences 3,764 961 7,213 (4,034) 88 2,654 (273) (757) 9,616
Reclassification - 4,070 76,489 181,216 - - - (261,775) -
Transfer from investment properties 16 - 10,800 1,670 - - - - - 12,470
Sub-total carried forward 1,125,125 296,968 2,298,388 1,344,055 298,916 393,454 51,151 419,393 6,227,450
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017
Buildings,
golf course Furniture Capital
Freehold Leasehold and Plant and Motor Office and work-in-
land land improvements machinery vehicles equipment fittings progress Total
Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
GROUP
2017 (Continued)
Sub-total brought forward 1,125,125 296,968 2,298,388 1,344,055 298,916 393,454 51,151 419,393 6,227,450
Transfer (to)/from intangible assets 21 - - - - - (2,030) - 55,391 53,361
Transfer from inventories - - - 5,410 36,471 - - - 41,881
Transfer from assets held for sale 580 3,600 3,320 - - - - - 7,500
Transfer from land held for property
development 17(a) 6,500 - - - - - - - 6,500
Transfer from property development
costs 17(b) 15,782 - - - - - - - 15,782
At 31 March 2017 1,147,987 300,568 2,301,708 1,349,465 335,387 391,424 51,151 474,784 6,352,474
Cost 1,164,862 546,057 4,327,748 7,017,019 808,859 1,911,834 342,393 500,162 16,618,934
Accumulated depreciation - (244,873) (1,825,588) (5,340,837) (468,850) (1,518,984) (290,106) - (9,689,238)
Accumulated impairment losses (16,875) (616) (200,452) (326,717) (4,622) (1,426) (1,136) (25,378) (577,222)
Net book value 1,147,987 300,568 2,301,708 1,349,465 335,387 391,424 51,151 474,784 6,352,474
DRB-HICOM BERHAD
ANNUAL REPORT 2017
247
248
DRB-HICOM BERHAD
ANNUAL REPORT 2017
Buildings,
golf course Furniture Capital
Freehold Leasehold and Plant and Motor Office and work-in-
land land improvements machinery vehicles equipment fittings progress Total
Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
GROUP
2016
At 1 April 2015 1,112,435 118,967 2,082,722 1,352,195 261,814 335,418 46,101 253,302 5,562,954
Acquisitions of subsidiary companies 51(iii) - - 908 - - 4 88 - 1,000
Additions - 663 54,795 61,346 78,953 48,290 8,827 454,732 707,606
Disposals - - (554) (5,494) (15,268) (2,284) (2,493) - (26,093)
Written off 6 - - (167) (2,308) (42) (195) (79) (14) (2,805)
Depreciation 6 - (3,058) (102,156) (271,812) (52,544) (95,430) (19,742) - (544,742)
Impairment losses 6 - - (2,963) (896) (422) (68) (6) - (4,355)
Currency translation differences 8 - 4,917 546 3,110 1,992 489 1,120 12,182
Reclassification - - 66,309 239,033 - (63,813) 19,206 (260,735) -
Transfer to investment properties 16 - - (1,295) - - - - - (1,295)
Transfer to intangible assets 21 - - - - - (5,941) - - (5,941)
Transfer from inventories - - - - 387 - - - 387
Transfer from assets held for sale 4,429 - - - - - - - 4,429
Sub-total carried forward 1,116,872 116,572 2,102,516 1,372,610 275,988 217,973 52,391 448,405 5,703,327
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017
Buildings,
golf course Furniture Capital
Freehold Leasehold and Plant and Motor Office and work-in-
land land improvements machinery vehicles equipment fittings progress Total
Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
GROUP
2016 (Continued)
Sub-total brought forward 1,116,872 116,572 2,102,516 1,372,610 275,988 217,973 52,391 448,405 5,703,327
Transfer from land held for property
development 17(a) 4,167 - - - - - - - 4,167
Adjustments (a) - - 556 - - - - - 556
At 31 March 2016 1,121,039 116,572 2,103,072 1,372,610 275,988 217,973 52,391 448,405 5,708,050
Cost 1,137,914 144,650 3,862,102 7,085,623 526,053 1,292,036 301,969 448,405 14,798,752
Accumulated depreciation - (27,494) (1,588,925) (5,385,743) (248,138) (1,072,490) (248,565) - (8,571,355)
Accumulated impairment losses (16,875) (584) (170,105) (327,270) (1,927) (1,573) (1,013) - (519,347)
Net book value 1,121,039 116,572 2,103,072 1,372,610 275,988 217,973 52,391 448,405 5,708,050
(a) The adjustments were related to gain on fair value adjustment arising upon the transfer of property, plant and equipment to investment properties in a subsidiary company.
DRB-HICOM BERHAD
ANNUAL REPORT 2017
249
DRB-HICOM BERHAD
250 ANNUAL REPORT 2017
Furniture
Plant and Motor Office and
machinery vehicles equipment fittings Total
Note RM’000 RM’000 RM’000 RM’000 RM’000
COMPANY
2017
At 1 April 2016 200 9 150 12 371
Depreciation 6 (200) - (42) (9) (251)
At 31 March 2017 - 9 108 3 120
2016
At 1 April 2015 400 9 194 20 623
Depreciation 6 (200) - (44) (8) (252)
At 31 March 2016 200 9 150 12 371
(b) Certain property, plant and equipment of the Group with a net book value of
RM1,950,134,000 (2016: RM1,846,659,000) have been charged as security for bank
borrowings (Notes 38 and 44).
(c) During the financial year, the borrowing costs capitalised for the purpose of construction of
plants and buildings amounted to RM9,568,000 (2016: RM6,136,000) at the interest rates
range from 5.74% to 6.46% (2016: 6.17% to 6.70%) per annum.
(d) The title deeds for certain landed properties of a subsidiary company with net carrying value
amounting to RM1,440,000 (2016: Nil) have yet to be issued in the name of the subsidiary
company as at 31 March 2017 by the relevant authorities.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 251
(e) The leasehold land of the Group includes leasehold land of a postal subsidiary company
with a lease period of 60 years commencing from 1 January 1992. The cost capitalised of
RM208,435,000 is in respect of the lease for the first 30 years as stipulated in the agreement
signed between the postal subsidiary company and the Government. The cost in respect of
the remaining 30 year lease period is subject to the agreement with the authorities, no later
than 31 December 2021, and thereafter will be recognised accordingly.
(f) The details of motor vehicles, plant and machinery, and office equipment acquired under
hire purchase and finance lease agreements included under property, plant and equipment
of the Group are as follows:
Group
2017 2016
RM’000 RM’000
Additions during the financial year:
- Plant and machinery 1,093 485
- Motor vehicles 2,611 20,573
- Office equipment - 1,905
3,704 22,963
14 CONCESSION ASSETS
Group
2017 2016
Note RM’000 RM’000
(a) Certain concession assets of the Group with a net book value of RM197,937,000 (2016:
RM216,892,000) have been charged as security for bank borrowings (Notes 38 and 44).
(b) The details of concession assets of the Group acquired under hire purchase and finance
lease agreements are as follows:
Group
2017 2016
RM’000 RM’000
Net book value at financial year end 19,215 10,159
Short Long
term term
leasehold leasehold
land land Total
Note RM’000 RM’000 RM’000
Group
2017
At 1 April 2016 8,334 43,690 52,024
Additions - 182 182
Amortisation 6 (582) (811) (1,393)
At 31 March 2017 7,752 43,061 50,813
2016
At 1 April 2015 8,916 44,496 53,412
Amortisation 6 (582) (806) (1,388)
At 31 March 2016 8,334 43,690 52,024
Certain prepaid lease properties of the Group with net book value of RM2,644,000 (2016:
RM5,740,000) have been charged as security for bank borrowings (Notes 38 and 44).
DRB-HICOM BERHAD
ANNUAL REPORT 2017 253
16 INVESTMENT PROPERTIES
Group Company
2017 2016 2017 2016
Note RM’000 RM’000 RM’000 RM’000
At fair value
At beginning of the
financial year 617,955 560,325 136,355 144,316
Acquisitions of subsidiary
companies 51(i) 31,100 - - -
Disposals of subsidiary
companies 52(i) (427,812) - - -
Additions 4,428 22,991 41 173
Adjustment - - (1,358) -
Disposals (627) - (10,800) -
Changes in fair value 6 15,647 15,420 6,416 (8,134)
Currency translation
differences 21,952 28,736 - -
Transfer from property
development cost 17(b) 1,216 - - -
Transfer (to)/from property,
plant and equipment 13 (12,470) 1,295 - -
Transfer to assets held for
sale 27 (4,500) (10,812) - -
At end of the financial year 246,889 617,955 130,654 136,355
(a) Certain investment properties of the Group and of the Company with carrying value of
RM60,252,000 (2016: RM454,495,000) and RM111,154,000 (2016: RM106,055,000)
respectively have been charged as security for bank borrowings (Notes 38 and 44).
(b) The fair value measurement of the investment properties is disclosed in Note 59.
Group
2017 2016
Note RM’000 RM’000
At cost
At beginning of the financial year
Land 712,840 510,092
Development costs 272,301 217,994
985,141 728,086
Add: Costs incurred during the financial year
- Land - 148,875
- Development costs 52,095 27,183
52,095 176,058
Transfer from property development costs 17(b)
- Land 17,708 54,645
- Development costs 133,782 30,519
151,490 85,164
Transfer to property, plant and equipment 13
- Land (6,133) (772)
- Development costs (367) (3,395)
(6,500) (4,167)
At end of the financial year 1,182,226 985,141
Group
2017 2016
Note RM’000 RM’000
At cost
At beginning of the financial year
Land 89,984 149,472
Development costs 461,718 435,320
Accumulated costs charged to profit or loss (267,557) (264,097)
284,145 320,695
Transfer to inventories
- Land (2,448) (275)
- Development costs (14,650) (6,600)
(17,098) (6,875)
Group
2017 2016
RM’000 RM’000
(c) Certain land held for property development and property development costs of the Group
with carrying value of RM496,325,000 (2016: RM378,404,000) have been charged as
security for bank borrowings (Notes 38 and 44).
(d) During the financial year, the borrowing costs capitalised in property development costs
amounting to RM408,000 (2016: RM2,188,000) at the interest rates range from 5.00% to
8.37% (2016: 5.70% to 8.14%) per annum.
18 SUBSIDIARY COMPANIES
Company
2017 2016
Note RM’000 RM’000
(b) As part of conditions precedent to the acquisition of 70% equity in Bank Muamalat Malaysia
Berhad (“BMMB”), Bank Negara Malaysia requires the Company to reduce its investment in
BMMB to 40%. The Company is considering various options to address this matter.
(c) Certain shares of subsidiary companies with carrying value of RM2,819,324,000 (2016:
RM2,549,308,000) have been charged as security for bank borrowings (Notes 38 and 44).
DRB-HICOM BERHAD
ANNUAL REPORT 2017 257
(d) It is in respect of investment in a former associated company, which now has become a
subsidiary company, following the completion of acquisition on 13 September 2016 as set
out in Note 51(i)(b).
(e) The Group’s subsidiary companies that have material non-controlling interest (“NCI”), based
on effective equity interest are as follows:
(e) The Group’s subsidiary companies that have material NCI, based on effective equity interest are as follows: (Continued)
2016 (Restated)
Carrying value of NCI 617,046 - 103,852 187,461 908,359
Net profit/(loss) for the financial year
attributable to NCI 40,145 - 8,026 (3,894) 44,277
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017
(f) The summarised financial information (before inter-company eliminations) of these subsidiary companies that have material NCI, not adjusted
for the ownership interest held by the Group, are as follows:
The financial result and cash flows of Pos Malaysia Berhad is for the period from October 2016 to March 2017.
DRB-HICOM BERHAD
ANNUAL REPORT 2017
259
260
DRB-HICOM BERHAD
ANNUAL REPORT 2017
(f) The summarised financial information (before inter-company eliminations) of these subsidiary companies that have material NCI, not adjusted
for the ownership interest held by the Group, are as follows: (Continued)
19 JOINT VENTURES
Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
(a) The details of the joint ventures, all of which are unquoted, are listed in Note 3.
(b) None of the Group’s joint ventures are material individually or in aggregate to the financial
position, financial performance and cash flows of the Group.
(c) The summarised financial information of the joint ventures, not adjusted for the proportion of
ownership interest held by the Group, are as follows:
2017 2016
RM’000 RM’000
(d) The summarised financial information based on Group’s interest in joint ventures for the
years are as follows:
Group
2017 2016
RM’000 RM’000
20 ASSOCIATED COMPANIES
Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
(b) The Group’s material associated companies, based on effective equity interest are as
follows:
Group
2017 2016
RM’000 RM’000
(e) The accumulated share of losses that have not been recognised by the Group amounted to
RM11,869,000 (2016: RM11,868,000). The Group has no obligation in respect of these
losses.
(f) In the previous financial year, the investment in an associated company with carrying value
of RM605,170,000 had been charged as security for bank borrowings (Notes 38 and 44).
264
(g) The summarised financial information of the associated companies, not adjusted for the proportion of ownership interest held by the Group, are as
follows:
Honda
Malaysia Pos Malaysia
Sdn. Bhd. Berhad Others Total
RM’000 RM’000 RM’000 RM’000
As at 31 March 2017
Non-current assets 1,003,796 - 122,425 1,126,221
Current assets 2,136,240 - 508,769 2,645,009
Non-current liabilities (226,424) - (10,360) (236,784)
Current liabilities (1,315,092) - (209,888) (1,524,980)
Net assets 1,598,520 - 410,946 2,009,466
The financial result of Pos Malaysia Berhad is for the period from April 2016 to September 2016.
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017
(g) The summarised financial information of the associated companies, not adjusted for the proportion of ownership interest held by the Group, are as
follows: (Continued)
Honda
Malaysia Pos Malaysia
Sdn. Bhd. Berhad Others Total
RM’000 RM’000 RM’000 RM’000
As at 31 March 2016
Non-current assets 804,254 700,923 123,749 1,628,926
Current assets 1,776,544 1,167,823 556,527 3,500,894
Non-current liabilities (263,131) (36,169) (7,369) (306,669)
Current liabilities (1,055,100) (716,981) (241,966) (2,014,047)
Net assets 1,262,567 1,115,596 430,941 2,809,104
(h) The summarised financial information based on Group’s interest in associated companies for the years are as follows:
Honda
Malaysia Pos Malaysia
Sdn. Bhd. Berhad Others Total
RM’000 RM’000 RM’000 RM’000
As at 31 March 2017
Group’s share of net assets represents carrying value of
Group’s interest in associated companies 543,498 - 213,045 756,543
As at 31 March 2016
Group’s share of net assets 429,273 359,333 234,299 1,022,905
Intangible asset - 341,711 - 341,711
Carrying value of Group’s interest in associated companies 429,273 701,044 234,299 1,364,616
21 INTANGIBLE ASSETS
Capitalised
development
Product cost of
Customer Computer development work-in- Dealership Brand
Goodwill relationship software expenditure progress network name Total
Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Group
2017
At 1 April 2016 402,156 4,127 140,381 660,166 414,034 17,748 41,710 1,680,322
Acquisitions of subsidiary
companies 51(i) 357,396 - - - - - - 357,396
Disposals of subsidiary companies 52(i) - - (41) - - - - (41)
Additions - - 9,231 15,897 166,575 - - 191,703
Transfer from/(to) property, plant
and equipment 13 - - 2,377 365 (56,103) - - (53,361)
Amortisation 6 - (2,360) (36,246) (186,864) - (5,916) - (231,386)
Impairment loss 6 - - (303) (55,290) - - - (55,593)
Written off 6 - - - - (71,348) - - (71,348)
Currency translation differences - - - (3,837) (1,332) - - (5,169)
Reclassification - - 8,951 234,704 (243,655) - - -
At 31 March 2017 759,552 1,767 124,350 665,141 208,171 11,832 41,710 1,812,523
Capitalised
development
Product cost of
Customer Computer development work-in- Dealership Brand
Goodwill relationship software expenditure progress network name Total
Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Group
2016 (Restated)
At 1 April 2015 365,580 6,487 133,536 450,652 370,844 23,664 41,710 1,392,473
Acquisitions of subsidiary
companies 51(iii) 104,086 - - - - - - 104,086
Additions - - 16,602 102 402,951 - - 419,655
Transfer from property, plant and
equipment 13 - - 5,636 305 - - - 5,941
Amortisation 6 - (2,360) (35,085) (135,218) - (5,916) - (178,579)
Impairment loss 6 (67,510) - - (13,963) - - - (81,473)
Currency translation differences - - (1) 46,528 (28,308) - - 18,219
Reclassification - - 19,693 311,760 (331,453) - - -
At 31 March 2016 402,156 4,127 140,381 660,166 414,034 17,748 41,710 1,680,322
(a) In the previous financial years, core deposits with cost of RM61,400,000 had been fully
amortised.
(b) Impairment testing for goodwill, brand name and capitalised development cost of work-in-
progress is done annually. Their carrying values were allocated to 8 (2016: 7) of the Group’s
cash-generating units (“CGU”), for impairment testing as follows:
2017 2016
(Restated)
RM’000 RM’000
The recoverable amounts of certain CGUs were determined based on value in use
calculations using cash flow projections prepared based on financial budgets approved by
Management covering a 5-year period. The pre-tax discount rate applied to the cash flow
projections range from 9.00% to 17.00% (2016: 3.79% to 12.00%) per annum. The
forecasted growth rates used to extrapolate cash flows beyond the 5-year period range from
0% to 4% (2016: 0% to 2%). The budgeted gross margins were determined based on past
performance and their expectations of market development. The discount rates used are
pre-tax and reflect specific risks relating to the relevant segments.
The recoverable amounts of certain other CGUs were determined based on valuations
performed by an independent valuer. The objective is to estimate the price that would be
received in an orderly transaction between market participants at the reporting date under
current market condition. The impairment test was performed by comparing the CGU’s
carrying amount with its fair value less costs of disposal.
(c) Customer relationship is stated at cost and amortised on a straight line basis over a period of
3 years (2016: 4 years).
(d) During the financial year, the borrowing costs capitalised for the purpose of development of
intangible assets amounted to RM964,000 (2016: RM1,138,000) at the interest rate of 5.00%
(2016: 5.00%) per annum.
DRB-HICOM BERHAD
270 ANNUAL REPORT 2017
22 DEFERRED TAXATION
Group
2017 2016
Note RM’000 RM’000
Group
2017 2016
RM’000 RM’000
Company
2017 2016
Note RM’000 RM’000
23 INVESTMENT SECURITIES
(a) Investment securities: financial assets at fair value through profit or loss
Non-
Banking banking
Held by a
banking Held by a
subsidiary subsidiary
company company Total
RM’000 RM’000 RM’000
Group
2017
Private equity funds 197,208 175 197,383
2016
Private equity funds 186,355 - 186,355
Non-
Banking banking
Held by a Held by
banking other
subsidiary subsidiary
company companies Total
RM’000 RM’000 RM’000
Group
2017
Government securities and treasury bills
Malaysian government investment certificates 3,531,945 - 3,531,945
Quoted securities
Equity securities, in Malaysia 159,858 155 160,013
Unquoted securities
Islamic private debt securities, in Malaysia 2,386,622 - 2,386,622
Cagamas bonds 25,385 - 25,385
Equity securities, in Malaysia 5,381 45,998 51,379
Foreign Islamic private debt securities and
22,225 - 22,225
sukuk
Total 6,131,416 46,153 6,177,569
Non-
Banking banking
Held by a Held by
banking other
subsidiary subsidiary
company companies Total
RM’000 RM’000 RM’000
Group
2016
Government securities and treasury bills
Malaysian government investment certificates 2,871,545 - 2,871,545
Quoted securities
Equity securities, in Malaysia 190,028 155 190,183
Equity securities, outside Malaysia 5,577 - 5,577
Unquoted securities
Islamic private debt securities, in Malaysia 2,539,330 - 2,539,330
Cagamas bonds 61,222 - 61,222
Equity securities, in Malaysia 5,381 46,048 51,429
Foreign Islamic private debt securities and
27,083 - 27,083
sukuk
Total 5,700,166 46,203 5,746,369
Group
2017 2016
RM’000 RM’000
Non-current
Unquoted Islamic private debt securities, in Malaysia 142,168 140,607
24 OTHER ASSETS
Group
2017 2016
RM’000 RM’000
Group
2017 2016
RM’000 RM’000
Cash line 670,262 824,516
Term financing
- Home financing 14,985,909 14,543,463
- Hire purchase receivables 886,833 1,034,092
- Syndicated financing 1,669,415 1,358,170
- Leasing receivables 4,997 9,038
- Other term financing 10,622,280 10,125,420
Revolving credits 1,207,755 1,171,887
Claims on customers under acceptance credits 695,741 564,524
Staff financing 191,970 174,808
Sukuk 110,349 154,605
Trust receipts 50,675 101,943
Ar-Rahnu 103,328 63,779
Sub-total carried forward 31,199,514 30,126,245
DRB-HICOM BERHAD
ANNUAL REPORT 2017 277
Group
2017 2016
RM’000 RM’000
(a) The table below shows the credit quality for financing of customers exposed to credit risk,
based on the banking subsidiary company's internal credit ratings:
Group
2017 2016
RM’000 RM’000
Financing of customers which are neither past due nor impaired are identified into 2 grades.
Good grade refers to financing of customers which are neither past due nor impaired in the
last 6 months and have never undergone any rescheduling or restructuring exercise
previously. Satisfactory grade refers to financing of customers which may have been past due
but not impaired or impaired during the last 6 months or have undergone a rescheduling or
restructuring exercise previously.
DRB-HICOM BERHAD
278 ANNUAL REPORT 2017
(a) (Continued)
Past due but not impaired financing of customers refers to where the customer has failed to
make principal or profit payment or both after the contractual due date for more than one day
but less than 3 months.
Classification of impaired financing and provisioning is made on the financing assets upon
determination of the existence of objective evidence of impairment and categorisation into
individual assessment and collective assessment in accordance with Note 2.9(iv).
(b) The movements of the allowance for financing during the financial year are as follows:
Collective Individual
assessment assessment Total
Note RM’000 RM’000 RM’000
Group
2017
At 1 April 2016 208,439 81,078 289,517
Charged 6 351,926 30,753 382,679
Write backs 6 (292,349) (14,552) (306,901)
Written off (31,857) (20,414) (52,271)
At 31 March 2017 236,159 76,865 313,024
2016
At 1 April 2015 239,227 42,631 281,858
Charged 6 419,481 50,307 469,788
Write backs 6 (395,965) (5,658) (401,623)
Written off (54,304) (6,202) (60,506)
At 31 March 2016 208,439 81,078 289,517
DRB-HICOM BERHAD
ANNUAL REPORT 2017 279
The amount and type of collateral required depends on assessment of credit risk of the
counterparty. Guidelines are implemented regarding the acceptability of types and collateral
and valuation parameters. The collateral obtained by the banking subsidiary company are
charges over properties and vehicles under financing, pledges over investment securities and
charges over the business assets.
The financial effect of collateral (i.e. quantification of the extent to which collateral and other
credit enhancements mitigate credit risk) held for financing of customer for the banking
subsidiary company is at 84.70% as at 31 March 2017 (2016: 100.60%).
As at 31 March 2017, the fair value of collateral that the banking subsidiary company holds
relating to financing of customers individually determined to be impaired amounted to
RM56,077,000 (2016: RM84,028,000). The collateral consists of cash, securities, letters of
guarantee, and properties.
It is the banking subsidiary company's policy that states disposal of repossessed collateral to
be carried out in an orderly manner. The proceeds are used to reduce or repay the
outstanding balance of financing. Collateral repossessed are subject to disposal as soon as it
is practical to do so. The banking subsidiary company does not occupy repossessed
properties for its own business use.
The statutory deposit is maintained with Bank Negara Malaysia in compliance with Section 26(2)(c)
and Section 26(3) of the Central Bank of Malaysia Act 2009, the amount of which is determined at set
percentages of total eligible liabilities.
Group
2017 2016
Note RM’000 RM’000
Investment properties 16 4,500 10,812
Other assets, represent golf membership - 7
4,500 10,819
DRB-HICOM BERHAD
280 ANNUAL REPORT 2017
28 INVENTORIES
Group
2017 2016
RM’000 RM’000
Certain inventories of the Group have been charged as security for bank borrowings (Notes 38 and
44).
Group Company
2017 2016 2017 2016
Note RM’000 RM’000 RM’000 RM’000
Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
(a) The currency exposure profile of trade and other receivables is as follows:
Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
(b) Trade receivables are non-interest bearing. The Group’s normal trade credit terms range from
14 days to 180 days (2016: 14 days to 180 days). They are recognised at their original invoice
amounts which represent their fair values on initial recognition. Other credit terms are
assessed and approved on a case by case basis.
(c) Included in the amounts due from subsidiary companies are balances of RM1,030,913,000
(2016: RM1,034,159,000) which are interest bearing and unsecured. The interest rates range
from 3.45% to 7.50% (2016: 3.47% to 7.50%) per annum.
(d) All other amounts due from joint ventures, associated companies and related parties are non-
interest bearing, unsecured and repayable on demand.
DRB-HICOM BERHAD
282 ANNUAL REPORT 2017
Group
2017 2016
RM’000 RM’000
Trade receivables that are neither past due nor impaired are creditworthy debtors with good
payment records with the Group. None of the Group’s trade receivables that are neither past
due nor impaired have been renegotiated during the financial year.
The Group has trade receivables amounting to RM599,921,000 (2016: RM582,618,000) that
are past due at the reporting date but not impaired. At the reporting date, majority of the trade
receivables of the Group are active customers with healthy business relationship, in which the
Management is of the view that the amounts are recoverable based on past payments history.
The Group’s trade receivables that are impaired at the reporting date and the movements of
the allowance for doubtful debts of trade receivables during the financial year are as follows:
Group
2017 2016
RM’000 RM’000
(e) (Continued)
Trade receivables that are individually determined to be impaired at the reporting date relate
to debtors that have defaulted payments.
(f) The movements of the allowance for doubtful debts of other receivables during the financial
year are as follows:
Group
2017 2016
RM’000 RM’000
(g) Certain receivables of the Group have been charged as security for bank borrowings (Notes
38 and 44).
(a) Deposits with licensed banks and financial institutions of the Group and of the Company with
maturity profile above 3 months amounting to RM11,242,000 (2016: RM36,396,000) and
RM542,000 (2016: RM11,112,000) respectively are excluded from cash and cash
equivalents.
(b) Certain deposits with licensed banks of the Group amounting to RM830,665,000 (2016:
RM1,018,558,000) have been charged as security for bank borrowings (Notes 38 and 44).
(c) The weighted average effective annual interest rates of short term deposits at the end of the
financial year is as follows:
Group Company
2017 2016 2017 2016
% % % %
Deposits with licensed banks 2.98 3.08 3.21 3.21
(d) The deposits of the Group and of the Company have an average maturity period of 41 days
(2016: 43 days) and 18 days (2016: 50 days) respectively.
DRB-HICOM BERHAD
284 ANNUAL REPORT 2017
Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
(a) Bank balances are deposits held at call with banks and are non-interest bearing.
(b) Included in cash and bank balances of the Group are bank accounts maintained pursuant to
the Housing Developers (Control & Licensing) Act 1966, amounting to RM81,671,000 (2016:
RM68,503,000).
(c) Included in cash and bank balances of the Group are cash restricted for payment of project
expenses held by a subsidiary company amounting to RM146,215,000 (2016:
RM19,906,000).
(d) The currency exposure profile of cash and bank balances is as follows:
Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
Group
2017 2016
RM’000 RM’000
(a) The currency exposure profile of cash and short-term funds is as follows:
Group
2017 2016
RM’000 RM’000
(b) The weighted average effective profit rates of money at call and interbank placements
maturing within 1 month is 2.50% (2016: 2.40%) per annum.
(c) The weighted average effective profit rates and weighted average maturity of cash and
balances with banks and other financial institution is 1% (2016: 1%) per annum and 62 days
(2016: 62 days) respectively.
DRB-HICOM BERHAD
286 ANNUAL REPORT 2017
Group
2016
Financial instruments at fair value through profit or
loss
Currency forward foreign exchange contracts 1,087,269 21,828 34,416
Currency swaps foreign exchange contracts 580,728 19,123 15,238
Islamic profit rate swap 3,675,000 - 13,903
Capped cross currency interest rate swap 651,900 - 34,789
5,994,897 40,951 98,346
(a) There is no significant change for the financial derivatives in respect of the following since the
last financial year ended 31 March 2016:
(i) the credit risk, market risk and liquidity risk associated with these financial derivatives;
(iii) the policy in place for mitigating or controlling the risks associated with these financial
derivatives.
(b) Disclosure of gain/loss arising from fair value changes of financial derivatives
During the current financial year, the Group recognised a total net gain of RM54,025,000
(2016: net loss of RM75,519,000) in profit or loss arising from the fair value changes on the
currency forward foreign exchange contracts, currency swaps foreign exchange contracts,
Islamic profit rate swap and capped cross currency interest rate swap which are marked to
market as at 31 March 2017.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 287
34 SHARE CAPITAL
(a) Under the Companies Act 2016 in Malaysia which came into effect on 31 January 2017, the
concept of authorised share capital no longer exists.
(b) In accordance with Section 74 of the Companies Act 2016, the Group’s and the Company’s
ordinary share no longer have a par or nominal value with effect from 31 January 2017.
Pursuant to Section 618 of the Companies Act 2016, the amount standing to the credit of the
Group’s and of the Company’s share premium became part of the Group’s and of the
Company’s share capital. There is no impact on the numbers of ordinary shares in issue or
the relative entitlement of any of the members of the Group and of the Company.
35 PERPETUAL SUKUK
As at 31 March 2017, the total Perpetual Sukuk issued by the Company is RM1,040,000,000 (2016:
RM1,040,000,000).
Total
Series Date of issue First call date RM’000
th
1 30 December 2014 5 anniversary of issue date 415,000
th
7 anniversary of issue date 300,000
th
2 27 February 2015 5 anniversary of issue date 100,000
th
3 15 April 2015 5 anniversary of issue date 100,000
th
4 15 May 2015 5 anniversary of issue date 50,000
th
5 12 August 2015 5 anniversary of issue date 75,000
1,040,000
DRB-HICOM BERHAD
288 ANNUAL REPORT 2017
The Perpetual Sukuk holders are conferred a right to receive distribution on a semi-annual basis from
their issuance date at 7.45% to 8.00% (2016: 7.45% to 8.00%) per annum, subject to a step-up rate
st rd st
after the 1 call date and on the 3 anniversary of the 1 call date of their respective tranches.
The Perpetual Sukuk has no fixed maturity and is redeemable in whole or in part, at the Company’s
st
option on their respective 1 call date together with any accrued, unpaid or deferred distributions.
While any distributions are unpaid or deferred, the Company will not declare, pay dividends or make
similar periodic payments in respect of, or redeem, buy-back or otherwise acquire any securities of
lower or equal rank. Based on its terms, the Perpetual Sukuk has been classified as an equity
instrument.
The Perpetual Sukuk was issued for the Company’s working capital purposes as well as to finance
investments such as purchase of shares, lands, buildings and property and development and
construction costs.
On 6 June 2016, PROTON Holdings Berhad (“PROTON”), a wholly-owned subsidiary company of the
Group, entered into a conditional subscription agreement with GOVCO Holdings Berhad (“GOVCO”),
a 99.99% company owned by Minister of Finance Incorporated, for the issuance of up to
1,250,000,000 redeemable convertible cumulative preference shares (“RCCPS”) of RM0.01 each in
PROTON at an issue price of RM1.00 per RCCPS to GOVCO (“Initial Subscription Agreement”). The
issuance of RCCPS is to enable PROTON to settle the long outstanding balances payable to the
various vendors. The Initial Subscription Agreement was completed on 7 June 2016 (“Initial
Subscription RCCPS”).
On 5 September 2016, PROTON entered into another conditional subscription agreement with
GOVCO for the issuance of up to 250,000,000 RCCPS at an issue price of RM1.00 per RCCPS to
GOVCO. At the Extraordinary General Meeting on 29 September 2016, the shareholders of DRB-
HICOM Berhad approved the issuance of up to 250,000,000 RCCPS by PROTON. On 22 June 2017,
GOVCO completed the subscription of the 250,000,000 RCCPS (“Subsequent Subscription RCCPS”).
The key salient terms of the Initial Subscription RCCPS and Subsequent Subscription RCCPS are as
follows:
Grace period 5 years from the date of issuance of the Initial Subscription
RCCPS.
Conversion rights PROTON has the option to convert partially or wholly any
outstanding RCCPS into new ordinary shares of PROTON at
any time after the Grace Period.
37 DEFERRED INCOME
(i) Club membership licence fees received in advance by a subsidiary company, net of amounts
recognised as income in the financial statements;
(ii) Grants received in advance; and
(iii) Deferred revenue mainly comprises fair value of free services given to customers upon sale
of vehicles and prepaid rental received.
Advance
license Deferred
fees Grants revenue Total
Note RM’000 RM’000 RM’000 RM’000
Group
2017
At 1 April 2016 72,848 39,912 71,500 184,260
Disposals of subsidiary
companies 52(i) - - (1,137) (1,137)
Received 225 23,399 72,249 95,873
Amortisation 6 (1,634) (30,505) (46,986) (79,125)
Currency translation
differences - - 160 160
At 31 March 2017 71,439 32,806 95,786 200,031
Group Company
2017 2016 2017 2016
Note RM’000 RM’000 RM’000 RM’000
Secured
Hire purchase and
finance lease liabilities 35,237 47,514 - -
- Portion repayable
within 12 months
included under
bank borrowings 44 (13,033) (18,159) - -
22,204 29,355 - -
Unsecured
Long term loans 1,726 8,849 - -
- Portion repayable
within 12 months
included under
bank borrowings 44 (1,726) (7,278) - -
- 1,571 - -
(a) The hire purchase and finance lease liabilities are secured against the respective assets
acquired as disclosed in Notes 13(f) and 14(b).
Group
The long term loans of the Group mainly comprise the following:
(i) The term loan of RM593,476,000 (2016: RM850,270,000) which bears floating interest
rate of 2.00% (2016: 2.00%) per annum above effective cost of funds, is repayable by
8 (2016: 12) instalments on quarterly basis, commencing from February 2015 to
refinance the outstanding balance of Lotus Cars Limited’s syndicated financing
facilities. The effective interest rate as at the reporting date was 6.17% (2016: 6.26%)
per annum.
(iii) The term loan of RM90,370,000 (2016: RM150,370,000) which bears floating interest
rate of 1.75% (2016: 1.75%) per annum above effective cost of funds, is repayable by
7 (2016: 11) instalments on quarterly basis, commencing from May 2014 for the
acquisition of shares in Composites Technology Research Malaysia Sdn. Bhd. The
effective interest rate as at the reporting date was 5.77% (2016: 6.13%) per annum.
(iv) The term loan of RM200,000,000 which bears floating interest rate of 1.75% per
annum above effective cost of funds, is repayable by 5 instalments on semi-annual
basis, commencing from March 2017 and was utilised for working capital and general
corporate purposes. The effective interest rate as at the reporting date was 6.42% per
annum.
The secured long term loans are secured by fixed and floating charges over shares in certain
subsidiary companies, certain property, plant and equipment, concession assets, prepaid
lease properties, investment properties, property development activities, inventories,
receivables and short term deposits as disclosed in Notes 3, 13, 14, 15, 16, 17, 28, 29 and
30.
Company
The long term loans of the Company are borrowings with terms as disclosed in Note 38(b)(iv)
above.
DRB-HICOM BERHAD
292 ANNUAL REPORT 2017
(c) Long term loans under Islamic financing (secured and unsecured)
Group
The long term loans under Islamic financing of the Group mainly comprise the following:
(ii) The Tier-2 Capital Islamic Subordinated Sukuk of RM400,000,000 had been fully
redeemed by a banking subsidiary company on 15 June 2016.
(iii) During the financial year, a banking subsidiary company undertook the following
issuances:
(iv) The term loan of RM236,351,000 (2016: RM299,377,000) which bears the profit rate of
2.00% (2016: 2.00%) per annum above effective cost of funds, is repayable by 15
(2016: 19) instalments on quarterly basis for the acquisition of shares in Pos Logistics
Berhad (formerly known as Konsortium Logistik Berhad) and Pos Asia Cargo Express
Sdn. Bhd. (formerly known as DRB-HICOM Asia Cargo Express Sdn. Bhd.) by Pos
Aviation Sdn. Bhd. (formerly known as KL Airport Services Sdn. Bhd.) (“PASB”). The
term loan was novated from PASB to HICOM Holdings Berhad during the financial
year. The effective profit rate as at the reporting date was 6.21% (2016: 6.78%) per
annum.
(v) The syndicated term loan of RM389,550,000 (2016: RM296,412,000) which bears the
profit rates range from 5.86% to 6.95% (2016: 5.68% to 6.95%) per annum, is
repayable by 16 (2016: 18) instalments on a quarterly basis commencing from
November 2016 to purchase plant and equipment by a subsidiary company, HICOM
Automotive Manufacturers (Malaysia) Sdn. Bhd.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 293
(c) Long term loans under Islamic financing (secured and unsecured) (Continued)
Group (Continued)
(vi) The term loan of RM164,567,000 (2016: RM150,999,000) which bears floating profit
rate of 1.25% (2016: 1.25%) per annum above effective cost of funds, is repayable by
135 (2016: 144) monthly instalments commencing from July 2016 to finance the
development cost of DRB-HICOM University of Automotive Malaysia. The effective
profit rate as at the reporting date was 5.45% (2016: 5.80%) per annum.
(vii) The syndicated term loan of RM91,856,000 (2016: RM116,351,000) which bears the
profit rate of 1.50% (2016: 1.50%) per annum above effective cost of funds, is
repayable on a quarterly basis commencing from March 2016 to finance the purchase
of concession assets. The effective profit rate as at the reporting date was 5.66%
(2016: 5.90%) per annum.
The secured long term loans under Islamic financing are secured by fixed and floating
charges over shares in certain subsidiary companies, certain property, plant and equipment,
concession assets, prepaid lease properties, investment properties, property development
activities, inventories, receivables and short term deposits as disclosed in Notes 3, 13, 14, 15,
16, 17, 28, 29 and 30.
Company
The long term loans under Islamic financing of the Company are borrowings with terms as
disclosed in Note 38(c)(i) above. In addition, the IMTN is also secured by a charge over the
Revenue Account in respect of the assignments of all proceeds from any entitlements to the
Company, including the repayments, distribution of capital, dividend payments and/or
advances from subsidiary companies and associated companies.
(d) The weighted average effective annual interest/profit rates at the end of the financial year are
as follows:
Group Company
2017 2016 2017 2016
% % % %
Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
Group
2017 2016
RM’000 RM’000
(g) The exposure of long term borrowings to interest/profit rate risk is as follows:
Maturity profile
Carrying Year 5
amount Year 2 Year 3 Year 4 and above
RM’000 RM’000 RM’000 RM’000 RM’000
Group
2017
Fixed rate
Hire purchase and finance lease liabilities 22,204 9,718 7,443 4,573 470
Long term loans 385,471 128,665 128,715 127,836 255
Long term loans under Islamic financing 2,395,839 555,367 384,433 440,589 1,015,450
2,803,514 693,750 520,591 572,998 1,016,175
Floating rate
Long term loans 487,963 435,369 48,876 2,722 996
Long term loans under Islamic financing 813,930 247,659 246,384 232,148 87,739
1,301,893 683,028 295,260 234,870 88,735
2016
Fixed rate
Hire purchase and finance lease liabilities 29,355 16,647 11,996 709 3
Long term loans 493,643 130,041 125,832 119,620 118,150
Long term loans under Islamic financing 1,995,327 63,742 524,447 329,426 1,077,712
2,518,325 210,430 662,275 449,755 1,195,865
Floating rate
Long term loans 923,170 335,392 350,462 2,899 234,417
Long term loans under Islamic financing 861,998 271,051 246,067 209,005 135,875
1,785,168 606,443 596,529 211,904 370,292
Company
2017
Floating rate
Long term loans 117,532 78,355 39,177 - -
Fixed rate
Long term loans under Islamic financing 1,420,856 481,323 329,883 399,788 209,862
1,538,388 559,678 369,060 399,788 209,862
2016
Fixed rate
Long term loans under Islamic financing 1,405,632 15,142 481,125 299,821 609,544
DRB-HICOM BERHAD
296 ANNUAL REPORT 2017
Provision
for claims
Sales from
Warranty returns suppliers Total
Note RM’000 RM’000 RM’000 RM’000
Group
2017
At 1 April 2016 157,138 143 251,715 408,996
Charged 6 73,555 347 - 73,902
Unused amounts reversed 6 (4,088) (160) (8,436) (12,684)
Utilised (99,742) (125) (53,334) (153,201)
Warranties reimbursable
from suppliers 45,947 - - 45,947
Transfer from other
payables 15,620 - - 15,620
Currency translation
differences (1,948) - - (1,948)
Fair value adjustment - - (11,083) (11,083)
At 31 March 2017 186,482 205 178,862 365,549
2016
At 1 April 2015 198,556 207 - 198,763
Charged 6 39,911 295 251,715 291,921
Unused amounts reversed 6 (7,685) (131) - (7,816)
Utilised (83,699) (228) - (83,927)
Warranties reimbursable
from suppliers 8,350 - - 8,350
Currency translation
differences 1,705 - - 1,705
At 31 March 2016 157,138 143 251,715 408,996
Group
2017 2016
Note RM’000 RM’000
Non-current:
- later than 2 years and not later than 5 years 1,704 1,267
- later than 5 years 137,105 102,574
138,809 103,841
As disclosed in Note 2.28(iii), the above represents the contractual obligation by a subsidiary
company in relation to the Service Concession Agreement.
DRB-HICOM BERHAD
298 ANNUAL REPORT 2017
The Group operates a funded defined benefit plan in respect of a foreign subsidiary company and
also unfunded defined benefit plans for eligible employees of certain subsidiary companies. The
carrying value of the post-employment benefit obligations of the Group was based on the valuations
by actuaries. The level of benefits provided depends on members’ length of service and their salary
in the final years leading up to retirement.
(a) The amount shown in the statement of financial position is presented as follows:
Group
2017 2016
RM’000 RM’000
Group
2017 2016
RM’000 RM’000
Group
2017 2016
RM’000 RM’000
Group
2017 2016
Note RM’000 RM’000
(e) The principal actuarial assumptions used in the latest actuarial valuation are as follows:
Group
2017 2016
Group
2017 2016
RM’000 RM’000
- Pound Sterling 29,713 36,602
- Ringgit Malaysia 8,287 7,767
- Thai Baht 236 141
38,236 44,510
(g) The following table demonstrates the sensitivity of the Group’s defined benefit obligations
to a reasonably possible change in significant assumptions as at 31 March 2017:
Increase Decrease
RM’000 RM’000
Group
2017
Discount rate (0.5% movement) (61,546) 70,417
Future salary (0.5% movement) 7,853 (7,290)
2016
Discount rate (0.5% movement) (52,109) 59,434
Future salary (0.5% movement) 6,476 (7,020)
Group
2017 2016
(j) The categories of plan assets of the foreign subsidiary company are as follows:
Group
2017 2016
RM’000 RM’000
Group
2017 2016
RM’000 RM’000
Savings deposits
Qard 1,052,795 1,096,785
Tawarruq 107,869 -
1,160,664 1,096,785
Demand deposits
Qard 2,994,706 3,679,040
Tawarruq 70,481 -
3,065,187 3,679,040
Term deposits
Negotiable Islamic debts certificates 1,550,790 1,703,656
Fixed term accounts tawarruq 11,003,797 11,114,518
Short term accounts 2,438,572 1,248,375
General investment deposits 140,575 211,475
15,133,734 14,278,024
Group
2017 2016
RM’000 RM’000
Group
2017 2016
RM’000 RM’000
(c) The weighted average effective annual profit rates of deposits from customers at the end of
the financial year is 3.00% (2016: 3.10%) per annum.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 303
Group Company
2017 2016 2017 2016
Note RM’000 RM’000 RM’000 RM’000
(a) The currency exposure profile of trade and other payables is as follows:
Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
(b) The Group’s normal trade payables terms range from 30 days to 180 days (2016: 30 days to
180 days).
DRB-HICOM BERHAD
304 ANNUAL REPORT 2017
(c) Included in the amounts due to subsidiary companies are balances of RM662,834,000
(2016: RM773,664,000) which are interest bearing and unsecured. The interest rates range
from 3.00% to 6.15% (2016: 3.10% to 6.15%) per annum.
(d) All other amounts due to joint ventures, associated companies and related parties are non-
interest bearing, unsecured and repayable on demand.
44 BANK BORROWINGS
Group Company
2017 2016 2017 2016
Note RM’000 RM’000 RM’000 RM’000
(i) Bank overdrafts
- secured 1,042 11,669 - -
- unsecured 5,469 9,793 - -
6,511 21,462 - -
Group Company
2017 2016 2017 2016
Note RM’000 RM’000 RM’000 RM’000
(ii) Other bank borrowings
(Continued)
Unsecured
Bankers acceptances 590,553 803,932 - -
Revolving credits 207,500 375,743 66,000 105,000
Short term loans under
Islamic financing 30,000 30,000 - -
Long term loans -
portion repayable
within 12 months 38 1,726 7,278 - -
Long term loans under
Islamic financing -
portion repayable
within 12 months 38 4,767 4,135 - -
Deferred liability 4,534 6,515 - -
Sub-total 839,080 1,227,603 66,000 105,000
(a) The currency exposure profile of bank overdrafts and other bank borrowings is as follows:
Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
(b) The secured bank overdrafts and other borrowings are secured by way of fixed and floating
charges over shares in certain subsidiary companies, certain property, plant and equipment,
concession assets, prepaid lease properties, investment properties, property development
activities, inventories, receivables and short term deposits (Notes 3, 13, 14, 15, 16, 17, 28,
29 and 30).
DRB-HICOM BERHAD
306 ANNUAL REPORT 2017
(c) The deferred liability owing by solid waste subsidiary company to local municipalities is in
relation to the transfer of certain units of movable assets from these municipalities to the
subsidiary company and the amounts are non-interest bearing, unsecured and payable in
accordance with the repayment schedule.
(d) The weighted average effective annual interest/profit rates of the bank overdrafts and other
bank borrowings at the end of the financial year are as follows:
Group Company
2017 2016 2017 2016
% % % %
Bank overdrafts 8.25 7.71 - -
Bankers acceptances 4.13 4.31 - -
Revolving credits 5.29 5.64 5.36 5.73
Short term loans 3.56 3.90 - -
Short term loans under
Islamic financing 4.23 3.40 - -
Group
2017 2016
RM’000 RM’000
Non-Mudharabah
Bank Negara Malaysia 9,770 10,132
Licensed banks 551,884 432,120
561,654 442,252
The above are denominated in Ringgit Malaysia and the average maturity period is not exceeding 1
year (2016: not exceeding 1 year).
Bills and acceptances payable are denominated in Ringgit Malaysia and the average maturity period
is not exceeding 1 month (2016: not exceeding 1 month).
47 MERGER RESERVE
Pursuant to Section 60(4)(a) of the previous Companies Act 1965, the premiums on the shares
issued by the Company as consideration for the acquisitions of certain subsidiary companies in the
financial year ended 31 March 2001 were not recorded as share premium. The difference between
the issue price and the nominal value of shares issued were classified as merger reserve.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 307
48 OTHER RESERVES
Group
2017 2016
RM’000 RM’000
Non-distributable
Share of subsidiary companies’ reserve 406,200 363,562
Reserves arising from dilution of interest in a subsidiary
company 81,179 -
Asset revaluation reserve on step-up acquisition of subsidiary
companies 21,101 21,101
Fair value reserve on property, plant and equipment and
prepaid lease properties 20,651 16,170
Share of associated companies’ reserves 2,400 2,769
Reserve on valuation of post-employment benefit obligations (31,400) (35,964)
500,131 367,638
49 CONSTRUCTION CONTRACTS
Group
2017 2016
Note RM’000 RM’000
50 RETAINED EARNINGS
The balance of the entire retained earnings of the Company as at 31 March 2017 may be distributed
under the single tier system.
DRB-HICOM BERHAD
308 ANNUAL REPORT 2017
2017
(a) On 15 June 2016, Composites Technology Research Malaysia Sdn. Bhd. (“CTRM”),
an indirect 96.87% owned subsidiary company of the Group, completed the
acquisition of an additional 35% equity interest in Unmanned Systems Technology
Sdn. Bhd. (“UST”) for a cash consideration of RM35,000. On 9 March 2017, CTRM
completed the acquisition of the remaining 14% equity interest in UST for a cash
consideration of RM14,000. As a result, UST became an effective 96.87% owned
subsidiary company of the Group.
(b) On 13 September 2016, following the completion of corporate exercise set out in
Note 57(b), Pos Malaysia Berhad (“Pos Malaysia”) which was formerly a 32.21%
owned associated company became a 53.50% owned subsidiary company of the
Group.
(c) On 31 January 2017, PHN Industry Sdn. Bhd. (“PHN”), an indirect wholly-owned
subsidiary company of the Group, completed the acquisition of 100% equity interest
in Oriental Summit Industries Sdn. Bhd. (“OSI”) from HICOM Holdings Berhad, a
wholly-owned subsidiary company of the Group for a cash consideration of
RM23,958,000, via an internal re-organisation. As a result, OSI became a wholly-
owned subsidiary company of PHN.
Details of cash flow arising from the acquisitions for items (b) and (d) are as follows:
RM’000
Total purchase considerations (943,588)
Less: Non-cash consideration arising from the acquisition for items (b)
and (d) 937,043
Purchase consideration, settled in cash (including the direct expenses of
RM2,895,000 attributable to the acquisition) (6,545)
Cash and cash equivalents arising from acquisitions of subsidiary
companies 613,582
Net cash inflow from acquisitions 607,037
DRB-HICOM BERHAD
ANNUAL REPORT 2017 309
2017 (Continued)
The subsidiary companies acquired during the financial year contributed revenue of
approximately RM958,717,000 and profit after taxation of approximately RM41,325,000 to the
Group for the period from the dates of acquisitions to 31 March 2017. Had the acquisitions
taken effect at the beginning of the financial year, the revenue and profit after taxation
contributed to the Group would have been RM1,811,680,000 and RM82,302,000 respectively.
Details of net assets acquired and goodwill arising from the acquisitions for items (b) and (d)
are as follows:
Carrying
value Fair value
RM’000 RM’000
Property, plant and equipment 653,537 653,537
Investment properties 31,100 31,100
Investment securities: financial assets at fair value
through profit or loss 408 408
Investment securities: held-to-maturity 84,136 84,136
Inventories 13,411 13,411
Trade and other receivables 495,831 495,831
Amount due from customers 17,325 17,325
Tax recoverable 8,131 8,131
Short term deposits 346,820 346,820
Cash and bank balances 266,762 266,762
Bank borrowings – current (98,798) (98,798)
Tax payable (1,500) (1,500)
Trade and other payables (690,559) (690,559)
Deferred tax liabilities (35,881) (35,881)
Non-controlling interest (507,426) (507,426)
Share of net assets acquired 583,297 583,297
Goodwill 357,396
Direct expenses attributable to the acquisition 2,895
Total purchase considerations 943,588
DRB-HICOM BERHAD
310 ANNUAL REPORT 2017
The accounting of business combination of Pos Malaysia and DKSB were based on the
provisional fair values of its identifiable assets, liabilities, and contingent liabilities. In
accordance with FRS 3, the Group will be carrying out the Purchase Price Allocation (“PPA”)
exercise within 12 months from the date of acquisitions.
(f) During the financial year ended 31 March 2017, the Group has completed the PPA
exercise to determine the fair values of the net assets of Media City Ventures Sdn.
Bhd. (“MCVSB”) and Northern Gateway Infrastructure Sdn. Bhd. (“NGISB”) within
the stipulated time period, i.e. 12 months from the acquisition dates, in accordance
with FRS 3. The details are as follows:
RM’000
Provisional goodwill 104,932
Final goodwill 104,086
Differences (846)
The adjusted fair values of MCVSB’s and NGISB’s identifiable assets, liabilities and
contingent liabilities have been reflected in the Consolidated Statement of Financial
Position as at 31 March 2016.
Below are the effects of the final PPA adjustments in accordance with FRS 3:
As
previously As
stated Adjustments restated
RM’000 RM’000 RM’000
As at 31 March 2016
Consolidated Statement of
Financial Position
Non-current assets
Intangible assets 1,681,168 (846) 1,680,322
Equity
Reserves 4,823,487 (863) 4,822,624
Non-controlling interest 908,342 17 908,359
Consolidated Statement of
Changes in Equity
Retained earnings 3,471,991 (863) 3,471,128
Non-controlling interest 908,342 17 908,359
DRB-HICOM BERHAD
ANNUAL REPORT 2017 311
2017 (Continued)
(f) (Continued)
Below are the effects of the final PPA adjustments in accordance with FRS 3:
(Continued)
As
previously As
stated Adjustments restated
RM’000 RM’000 RM’000
On 18 October 2016, Isuzu Service Center Sdn. Bhd. (“ISC”) was incorporated with issued
and paid-up share capital of RM100 divided into 100 ordinary shares of RM1 each. The
shareholdings of 51% and 49% in ISC are held by Isuzu Malaysia Sdn. Bhd. and Automotive
Corporation (Malaysia) Sdn. Bhd. respectively. As a result, ISC became an indirect 73.69%
joint venture of the Group.
2016
(a) On 8 June 2015, the Company completed the acquisition of 100% equity interest in
EON Network Systems Sdn. Bhd. (“ENSSB”) comprising 2 ordinary shares of
RM1.00 each from EON Technologies Sdn. Bhd., an indirect wholly-owned
subsidiary company of the Group, via an internal re-organisation. On 16 June 2015,
ENSSB changed its name to DRB-HICOM Northern Gateway Sdn. Bhd.
2016 (Continued)
(d) On 18 December 2015, the Company completed the acquisition of 51% equity
interest in Media City Ventures Sdn. Bhd. (“MCVSB”) for a purchase consideration
of RM85,680,000. As a result, MCVSB became a subsidiary company of the Group.
Details of cash flow arising from the acquisitions for items (c) and (d) are as follows:
RM’000
Purchase considerations, settled in cash (105,680)
Cash and cash equivalents arising from acquisitions of subsidiary
companies 3,053
Net cash outflow from acquisitions (102,627)
The subsidiary companies acquired during the financial year contributed revenue of
approximately RM18,930,000 and loss after taxation of approximately RM153,000 to the
Group for the period from the dates of acquisitions to 31 March 2016. Had the acquisitions
taken effect at the beginning of the financial year, the revenue and loss after taxation
contributed to the Group would have been RM18,930,000 and RM711,000 respectively.
Details of net assets acquired and goodwill arising from the acquisitions for items (c) and (d)
are as follows:
Carrying
value Fair value
RM’000 RM’000
2016 (Continued)
On 7 July 2015, HICOM Builders Sdn. Bhd. (“HBSB”), an indirect wholly-owned subsidiary
company of the Group, entered into an agreement with MRCB Engineering Sdn. Bhd.
(“MESB”) and Dekad Kaliber Sdn. Bhd. (“DKSB”), in relation to the proposed development of
the integrated, custom, quarantine and security complex located at Bukit Kayu Hitam, Kedah.
HBSB’s and MESB’s shareholdings in DKSB are 49% and 51% respectively. As a result,
DKSB became a 49% associated company of the Group.
2017
(a) On 20 July 2016, the Group announced that Lotus Cars Australia Pty. Limited
(“LCA”), an indirect dormant wholly-owned subsidiary company of PROTON
Holdings Berhad (“PROTON”) was voluntarily deregistered and as a result, LCA
ceased to be a subsidiary company of the Group.
(b) On 13 September 2016, following the completion of the corporate exercise set out in
Note 57(b), the Group’s effective equity interest in KL Airport Services Sdn. Bhd.
(now known as Pos Aviation Sdn. Bhd.) group has reduced from 100% to 53.50%.
(d) On 20 January 2017, the Group announced the dissolution of Proton Motor Pars Co.
(Private Joint Stock) (“PMP”), an indirect dormant wholly-owned subsidiary company
of PROTON. Upon the completion of dissolution, PMP will cease to be an indirect
wholly-owned subsidiary company of the Group.
DRB-HICOM BERHAD
314 ANNUAL REPORT 2017
2017 (Continued)
(e) On 31 January 2017, Edaran Otomobil Nasional Berhad (“EON”), an indirect wholly-
owned subsidiary company of the Group, completed the disposal of its entire 100%
equity interest in Multi Automotive Service and Assist Sdn. Bhd. (“MASA”) for a cash
consideration of RM1.00. As a result, MASA ceased to be an indirect wholly-owned
subsidiary company of the Group.
(g) On 30 March 2017, the Company announced the proposed winding-up of its direct
and indirect subsidiary companies via members’ voluntary winding up (“MVL”) and
creditors’ voluntary winding up (“CVL”) and the companies involved in the exercise
are as follows:
2017 (Continued)
(g) (Continued)
Upon the completion of the liquidation exercise, the above companies will cease to
be subsidiary companies of the Group. There was a minimal financial impact arising
from the deconsolidation of subsidiary companies as above to the Group’s assets
and liabilities.
The effects of the disposals for items (c), (e) and (f), up to the dates of disposals on the results
of the Group are shown below:
RM’000
Revenue 19,448
Cost of sales (10,786)
Gross profit 8,662
Other income 3,589
Selling and distribution expenses (71)
Administrative expenses (4,094)
Finance costs (4,850)
Profit before taxation 3,236
Taxation 573
Profit after taxation 3,809
DRB-HICOM BERHAD
316 ANNUAL REPORT 2017
2017 (Continued)
Below are the effects of the disposals for items (c), (e) and (f) on the financial position and
the cash flows of the Group:
RM’000
Property, plant and equipment 212
Investment properties 427,812
Intangible assets 41
Deferred tax assets 268
Trade and other receivables 2,680
Tax recoverable 124
Short term deposits 1,923
Cash and bank balances 11,028
Trade and other payables (8,777)
Deferred income (1,137)
Bank borrowings - current (3,056)
Long term borrowings (255,229)
Non-controlling interest (27,185)
Share of net assets disposed 148,704
Gain on disposals (net) 398,257
Other comprehensive income – reclassification adjustments (37,387)
Total sales considerations (net) 509,574
Less: Cash and cash equivalents of the subsidiary companies disposed (12,951)
Net cash inflow from disposals 496,623
DRB-HICOM BERHAD
ANNUAL REPORT 2017 317
2017 (Continued)
The effects of the disposals for items (c), (e) and (f), up to the dates of disposals on the results
of the Group are shown below: (Continued)
RM’000
On 17 October 2016, Suzuki Malaysia Automobile Sdn. Bhd. (“SMA”), a 40% owned
associated company of the Group has commenced the dissolution exercise via members’
voluntary winding up. Upon the completion of dissolution, SMA will cease to be a 40%
owned associated company of the Group.
2016
(a) On 26 August 2015, the Company announced that Myanmar Scott & English Co.,
Ltd (“MSE”), a wholly-owned dormant subsidiary company of Scott & English
(Malaysia) Sdn. Bhd., which in turn is an indirect 70% owned subsidiary company of
the Group, was voluntarily deregistered. As a result, MSE ceased to be a subsidiary
company of the Group.
(b) On 26 August 2015, the Company announced that Scott & English (Cambodia)
Limited (“SEC”), a wholly-owned dormant subsidiary company of Scott & English
(Malaysia) Sdn. Bhd., which in turn is an indirect 70% owned subsidiary company of
the Group, was voluntarily deregistered. As a result, SEC ceased to be a subsidiary
company of the Group.
(b) On 11 August 2015, Perusahaan Otomobil Nasional Sdn. Bhd., an indirect wholly-
owned subsidiary company of the Group, completed the disposal of its entire 25%
equity interest in Vina Star Motors Corporation (“VSMC”) to Mitsubishi Motor
Corporation and Mitsubishi Corporation for a sale consideration of RM17,146,000.
As a result, VSMC ceased to be an associated company of the Group.
DRB-HICOM BERHAD
318 ANNUAL REPORT 2017
In addition to related party disclosures mentioned elsewhere in the financial statements, set out
below are other significant related party transactions which were carried out on mutually agreed
terms and conditions.
Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
(a) Non-banking
Group
2017 2016
RM’000 RM’000
Group
2017 2016
RM’000 RM’000
(b) Banking
In the normal course of business, the banking subsidiary company makes various
commitments and incurs certain contingent liabilities with legal resource to its customers. No
material losses are anticipated as a result of these transactions.
Total
Credit risk
Principal equivalent weighted
amount amount amount
RM’000 RM’000 RM’000
At 31 March 2017
Contingent liabilities
Direct credit substitutes 213,136 213,136 181,099
Trade-related contingencies 22,970 4,594 4,581
Transaction related contingencies 425,973 212,986 208,304
Commitments
Credit extension commitment:
- maturity within 1 year 798,577 159,715 146,883
- maturity exceeding 1 year 1,019,465 509,732 452,990
Total
Credit risk
Principal equivalent weighted
amount amount amount
RM’000 RM’000 RM’000
At 31 March 2016
Contingent liabilities
Direct credit substitutes 61,401 61,401 60,691
Trade-related contingencies 9,778 1,956 1,444
Transaction related contingencies 247,807 123,904 123,775
Commitments
Credit extension commitment:
- maturity within 1 year 808,248 161,650 155,099
- maturity exceeding 1 year 1,878,796 939,398 185,501
For management purpose, the Group is organised into business units based on the industry and has
3 reportable segments as follows:
The Management Committee monitors the operating results of its business units separately for the
purpose of making decisions about resource allocation and performance assessment. Segment
performance is evaluated based on profit or loss and is measured consistently with profit or loss in
the consolidated financial statements.
Segment results represent segment revenue less segment expenses. Unallocated expenses
represent corporate operating and administrative expenses.
Segment assets consist of primarily of property, plant and equipment, concession assets,
prepaid lease properties, investment properties, inventories, receivables, property
development costs, land held for property development, investment securities, banking
related assets, cash and bank balances and derivative assets. Segment liabilities comprise
mainly payables, banking related liabilities, provision for liabilities and charges, provision for
concession assets and derivative liabilities. Unallocated liabilities consist of accruals on
corporate operating and administrative expenses.
The Group’s secondary format, by geographical location, is not shown as the activities of the
Group are predominantly in Malaysia and the overseas segment does not contribute to more
than 10% of the consolidated revenue and assets.
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017
The information of each of the Group’s business segments for the financial year ended 31 March 2017 is as follows:
Primary reporting format - business segment
Property,
Asset & Investment
Automotive Services Construction Holding Group
RM’000 RM’000 RM’000 RM’000 RM’000
Financial year ended 31 March 2017
Revenue
Total revenue 8,650,536 3,714,283 535,957 50,016 12,950,792
Inter-segment revenue (573,026) (160,771) (108,645) (50,016) (892,458)
External revenue 8,077,510 3,553,512 427,312 - 12,058,334
Other information
The information of each of the Group’s business segments for the financial year ended 31 March 2016 is as follows:
Primary reporting format - business segment
Property,
Asset & Investment
Automotive Services Construction Holding Group
RM’000 RM’000 RM’000 RM’000 RM’000
Revenue
Total revenue 9,773,299 2,685,623 351,168 56,024 12,866,114
Inter-segment revenue (407,396) (172,403) (57,350) (56,024) (693,173)
External revenue 9,365,903 2,513,220 293,818 - 12,172,941
Other information
Estimates and judgements are continually evaluated by the Directors and are based on historical
experience and other factors, including expectations of future events that are believed to be
reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future events. The resulting
accounting estimates will, by definition, rarely equal to the related actual results. To enhance the
information content of the estimates, certain key variables that are anticipated to have material
impact to the Group’s results and financial position are tested for sensitivity to changes in the
underlying parameters. The estimates and assumptions that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within the next financial year are
outlined below:
The Group tests property, plant and equipment and intangible assets for impairment if there
is any indicator of impairment. The recoverable amounts are determined based on value in
use or fair value less cost to sell, whichever is higher. Under the fair value less cost to sell
approach, when estimating the fair value of certain assets, the objective is to estimate the
price that would be received in an orderly transaction between market participants at the
reporting date under current market conditions. Under the value in use approach, estimating
the value in use involves estimating the future cash inflows and outflows that will be derived
from these assets and discounting them at an appropriate rate. Based on management’s
impairment review, impairment loss of RM8,049,000 (2016: RM4,355,000) and
RM55,593,000 (2016: RM81,473,000) was recognised for property, plant and equipment and
intangible assets respectively during the financial year.
The Group assesses at each reporting date whether there is any objective evidence that a
financial asset is impaired. To determine whether there is objective evidence of impairment,
the Group considers factors such as the probability of insolvency or significant financial
difficulties of the debtor and default or significant delay in payments.
Where there is objective evidence of impairment, the amount and timing of future cash flows
are estimated based on historical loss experience for assets with similar credit risk
characteristics.
Financing that have been assessed individually but for which no impairment is required as
well as all individually insignificant financing need to be assessed collectively, in groups of
assets with similar credit risk characteristics. This is to determine whether impairment should
be made due to incurred loss events for which there is objective evidence but effects of
which are not yet evident. The collective assessment takes into account of data from the
financing portfolio (such as credit quality, levels of arrears, credit utilisation, financing to
collateral ratios) and judgements on the effect of concentrations of risks (such as the
performance of different individual groups).
DRB-HICOM BERHAD
328 ANNUAL REPORT 2017
The Group recognises revenue based on percentage of completion method. The stage of
completion is measured by reference to the costs incurred to date to the estimated total
costs. Judgement is required in determining the stage of completion, the extent of the costs
incurred, the estimated total revenue (other than fixed price contracts) and costs, as well as
the recoverability of the receivables. In making the judgement, the Group relies on past
experience and work of specialists.
Deferred tax assets are recognised for all unabsorbed tax losses, unutilised capital
allowances, unutilised reinvestment allowances, unutilised investment tax allowances and
other deductible temporary differences to the extent that it is probable that taxable profit will
be available against which the losses and tax allowances can be utilised. Significant
management judgement is required to determine the amount of deferred tax assets that can
be recognised based on the likely timing and level of future taxable profits together with
future tax planning strategies.
Allowance for inventory write down is made based on an analysis of the ageing profile and
expected sales patterns of individual items held in inventory. This requires an analysis of
inventory usage based on expected future sales transactions taking into account current
market prices, useful lives of inventories and expected cost to sell. Changes in the inventory
ageing and expected usage profiles can have an impact on the allowance recorded.
The fair value of financial instruments that are not traded in an active market is determined
by using valuation techniques. The Group uses its judgement to select a variety of methods
and make assumptions that are mainly based on market conditions existing at the end of
each reporting date. The Group has used discounted cash flow analysis for various
available-for-sale financial assets that are not traded in active markets.
The Group and the Company estimate the fair values of its investment properties using
investment and market comparison methods. The fair value of investment properties is
determined by independent professional valuers, having appropriate recognised professional
qualifications and recent experience in the location and category of property being valued.
The independent professional valuers provide the fair value of the Group’s and of the
Company’s investment properties portfolio annually. The principal assumptions underlying
these valuations are further explained in Note 59(c)(v).
DRB-HICOM BERHAD
ANNUAL REPORT 2017 329
(i) Fair value estimation of derivative financial instruments, investment securities: financial
investments at fair value through profit or loss and available-for-sale
For financial instruments measured at fair value, where the fair values cannot be derived
from active markets, these fair values are determined using a variety of valuation techniques,
including the use of mathematical models. Whilst the Group generally uses widely
recognised valuation models with market observable inputs, judgement is required where
market observable data are not available. Such judgement normally incorporate assumptions
that other market participants would use in their valuations, including assumptions on profit
rate yield curves, exchange rates, volatilities and prepayment and default rates.
The Group, as the lessor, has entered into long term leasing agreements for certain of its
motor vehicles with its customers (as lessees). The Group assessed the following:
(i) The Group does not pass the titles of the motor vehicles to the lessee by the end of
the lease term;
(iii) The lease term is not for a major part of the economic life of the motor vehicles;
(iv) At the inception of the lease, the present value of the minimum lease payments
amounts is not substantially all the fair value of the leased motor vehicles; and
Management are of the view that the Group retains all the significant risks and rewards of
ownership of these motor vehicles and thus accounted for the leasing agreements as
operating leases.
Provision for claims from suppliers have been computed based on the shortfall of the actual
order volume compared to the required volume for vendors to recover their tooling cost. The
provision recorded is computed based on the estimated payout for claims which is subject to
negotiation on a case-by-case basis with its suppliers. It is expected that most of the
provision for claims from suppliers for models will be incurred within 1 to 3 years from the
reporting date. When there are deviations from the original estimate, such difference will
impact the carrying value of the provision and will be charged to profit or loss in the period
such an estimate has been changed.
The carrying amount of the provision for claims from suppliers are disclosed in Note 39.
DRB-HICOM BERHAD
330 ANNUAL REPORT 2017
The carrying amounts of provision for product warranties for defective works are disclosed in
Note 39.
Under the Service Concession Agreement, the concession subsidiary company has
contractual obligations to ensure that the levels of investments are sufficient to maintain the
collection services and public cleansing management services to a specified standard. The
subsidiary company has recognised a provision for its obligation which depends on the
estimated future capital expenditure to maintain the services. These judgements and
assumptions are subject to risks and uncertainties, hence there is a possibility that changes
in circumstances will alter expectations, which may impact the amount of provisions
recognised in the financial statements.
57 SIGNIFICANT EVENTS
(b) On 13 September 2016, the Group completed the following corporate exercise:
(i) Acquired 225,030,030 new ordinary shares of RM0.50 each in Pos Malaysia Berhad
(“POSM Shares”) satisfied by way of disposing 100% equity interest in KL Airport
Services Sdn. Bhd. (“KLAS”) (now known as Pos Aviation Sdn. Bhd.) by HICOM
Holdings Berhad to Pos Malaysia Berhad (“Pos Malaysia”); and
(ii) Acquired 20,720,721 new POSM Shares satisfied by way of disposing part of a parcel
of freehold industrial land measuring 9.912 acres located in Section 28, Shah Alam
(“Section 28 Land”) by HICOM Indungan Sdn. Bhd. to Pos Malaysia.
As a result of the above transactions, Pos Malaysia which was formerly a 32.21% owned
associated company became a 53.50% owned subsidiary company of the Group and the
Group’s effective equity interest in KLAS has reduced from 100% to 53.50%.
The purchase consideration for the acquisition of control in Pos Malaysia is determined as
the aggregate of the following:
RM’000
(i) Remeasurement of the previously held interest of 32.21% at the date of 563,972
acquisition
(ii) Dilution of 46.50% of the Group’s interest in KLAS and Section 28 Land 371,057
935,029
(c) On 15 November 2016, HICOM Megah Sdn. Bhd., an indirect wholly-owned subsidiary
company of the Group, completed the disposal of its entire equity interest of 90% in Corwin
Holding Pte. Ltd. (“Corwin”) for a total cash consideration of SGD170,900,000. As a result,
Corwin ceased to be an indirect subsidiary company of the Group.
DRB-HICOM BERHAD
332 ANNUAL REPORT 2017
58 SUBSEQUENT EVENTS
(b) On 24 May 2017, the Company entered into the following binding heads of agreement with
Zhejiang Geely Holding Group Co., Ltd. (“ZGH”) for the:
(ii) proposed divestment by the Company of its indirect 100% equity interest in Lotus
Advance Technologies Sdn. Bhd. (“Lotus Advance”), a wholly-owned subsidiary
company of PROTON comprising 51% equity interest to ZGH and 49% equity
interest to Etika Automotive Sdn. Bhd. (“Etika Automotive”) (“Proposed Divestment”).
(i) a conditional share subscription agreement with ZGH and PROTON for subscription
of 547,020,534 ordinary shares by ZGH, representing 49.9% of the enlarged paid-up
share capital of PROTON for a total subscription price of RM460,300,000 to be
satisfied as follows:
(b) the grant of the licence of Boyue model by ZGH (without the right to sub-
licence) to Perusahaan Otomobil Nasional Sdn. Bhd. (“PONSB”), an indirect
wholly-owned subsidiary company of the Group at an ascribed value of
RM290,000,000.
(ii) a conditional share purchase agreement with ZGH and Etika Automotive for the sale
of 100% of its indirect equity in Lotus Advance, through its subsidiary company,
PROTON comprising 51% equity interest to ZGH and 49% equity interest to Etika
Automotive for a total cash consideration of GBP100,000,000.
The Proposed Share Subscription and Proposed Divestment are collectively referred to as
“Proposals”.
The Proposals are subject to approvals of the relevant authorities and shareholders of the
Company. Upon the completion of the Proposals, PROTON which is currently a wholly-
owned subsidiary company will become a 50.1% owned subsidiary company of the Group
and Lotus Advance will cease to be an indirect wholly-owned subsidiary company of the
Group.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 333
(c) On 21 June 2017, the Ministry of Finance approved the award of a Research and
Development (“R&D”) Reimbursement Grant for R&D activities carried out by PONSB, in line
with the policies of the Government of Malaysia. The R&D Reimbursement Grant of
RM1,100,000,000 will be disbursed upon completion of the agreements relating to the
Proposed Share Subscription as set out in Note 58(b)(i). The R&D Reimbursement Grant will
be utilised to settle the syndicated term loan under PONSB, shareholders advances owed by
PROTON to the Company and any other lenders which have advanced funds to PONSB to
service the syndicated term loan payments prior to its settlement.
(d) On 22 June 2017, the Company reached an agreement in principle with the Ministry of
Finance on the following:
st
(i) to purchase the principal redemption certificate relating to the 1 Tranche of the
redeemable convertible cumulative preference shares (“RCCPS”) (with redemption
date of 6 June 2023), amounting to RM300,000,000 from GOVCO including the
preference dividend certificate for the annual dividend entitlement ended 6 June
2017 of RM50,000,000 (collectively, “RCCPS Purchase”); and
(ii) to create a first charge on certain identified assets, to the benefit of GOVCO, where
the portfolio of such fixed legal assets would have a minimum value equivalent to the
prevailing face value of the remaining principal tranches of RCCPS holding by
GOVCO, which would stand at RM1,200,000,000, after the RCCPS Purchase.
The transactions for items (b), (c) and (d) are expected to be completed by the end of the next
financial year.
DRB-HICOM BERHAD
334 ANNUAL REPORT 2017
The table below provides the fair value measurement hierarchy of the Group’s and the
Company’s assets and liabilities:
Liabilities measured at
fair value:
Derivative liabilities - 64,864 - 64,864
2016
Assets measured at fair
value:
Investment securities:
available-for-sale 96,086 5,631,019 19,264 5,746,369
Investment securities: fair
value through profit or
loss - - 186,355 186,355
Derivative assets - 40,951 - 40,951
Investment properties - - 617,955 617,955
96,086 5,671,970 823,574 6,591,630
Liabilities measured at
fair value:
Derivative liabilities - 98,346 - 98,346
DRB-HICOM BERHAD
ANNUAL REPORT 2017 335
The table below provides the fair value measurement hierarchy of the Group’s and the
Company’s assets and liabilities: (Continued)
2016
Assets measured at fair
value:
Investment properties - - 136,355 136,355
For fair value measurements categorised within Levels 2 and 3 of the fair value hierarchy,
the fair values are determined using appropriate valuations technique, which include the use
of mathematical models, such as discounted cash flow models and option pricing models,
comparison to similar instruments for which market observable prices exist and other
valuation techniques. Valuation techniques used incorporate assumptions regarding discount
rates, profit rate yield curves, estimates of future cash flows and other factors.
DRB-HICOM BERHAD
336 ANNUAL REPORT 2017
The reconciliation of the financial and non-financial assets that are measured at Level 3 of
the hierarchy of fair value is as follows:
Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
(b) Financial instruments that are not measured at fair value and which carrying amounts are not reasonable approximation of fair value:
Total Carrying
Level 1 Level 2 Level 3 fair value amount
RM’000 RM’000 RM’000 RM’000 RM’000
Group
2017
Assets
Investment securities: held-to-maturity - 150,663 - 150,663 142,168
Financing of customers - 8,509,050 5,142,939 13,651,989 14,711,816
- 8,659,713 5,142,939 13,802,652 14,853,984
Liabilities
Hire purchase and finance lease liabilities - 22,204 - 22,204 22,204
Long term loans (fixed rate) - 385,471 - 385,471 385,471
Long term loans under Islamic financing (fixed rate) - 2,395,764 - 2,395,764 2,395,839
Bank borrowings (non-current) - 2,803,439 - 2,803,439 2,803,514
Deposits from customers - 2,559,148 16,838,626 19,397,774 19,397,894
Deposits and placements of banks and other
financial institutions - 551,884 9,403 561,287 561,654
Bills and acceptances payable - - 9,196 9,196 9,196
- 5,914,471 16,857,225 22,771,696 22,772,258
DRB-HICOM BERHAD
ANNUAL REPORT 2017
337
338
(b) Financial instruments that are not measured at fair value and which carrying amounts are not reasonable approximation of fair value:
(Continued)
Total Carrying
Level 1 Level 2 Level 3 fair value amount
RM’000 RM’000 RM’000 RM’000 RM’000
Group
2016
Assets
Investment securities: held-to-maturity - 143,374 - 143,374 140,607
Financing of customers - 8,014,064 4,706,692 12,720,756 14,327,376
- 8,157,438 4,706,692 12,864,130 14,467,983
Liabilities
Hire purchase and finance lease liabilities - 29,355 - 29,355 29,355
Long term loans (fixed rate) - 493,643 - 493,643 493,643
Long term loans under Islamic financing (fixed rate) - 1,994,373 - 1,994,373 1,995,327
Bank borrowings (non-current) - 2,517,371 - 2,517,371 2,518,325
Deposits from customers - 931,301 18,163,632 19,094,933 19,093,655
Deposits and placements of banks and other
financial institutions - 432,120 9,823 441,943 442,252
Bills and acceptances payable - - 29,350 29,350 29,350
- 3,880,792 18,202,805 22,083,597 22,083,582
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017
(b) Financial instruments that are not measured at fair value and which carrying amounts are not reasonable approximation of fair value:
(Continued)
Total Carrying
Level 1 Level 2 Level 3 fair value amount
RM’000 RM’000 RM’000 RM’000 RM’000
Company
2017
Liabilities
Bank borrowings (non-current) - long term loans
under Islamic financing (fixed rate) - 1,420,781 - 1,420,781 1,420,856
2016
Liabilities
Bank borrowings (non-current) - long term loans
under Islamic financing (fixed rate) - 1,404,679 - 1,404,679 1,405,632
DRB-HICOM BERHAD
ANNUAL REPORT 2017
339
DRB-HICOM BERHAD
340 ANNUAL REPORT 2017
(i) Assets and liabilities that are not carried at fair value and whose carrying amounts
are reasonable approximation of fair value
The following are classes of financial instruments that are not carried at fair value
and whose carrying amounts are reasonable approximation of fair value:
Note
Banking related assets - statutory deposit with Bank Negara Malaysia 26
Trade and other receivables (current) 29
Bank borrowings (non-current - floating rate) 38
Banking related liabilities - deposits from customers 42
Trade and other payables (current) 43
Bank borrowings (current) 44
The carrying amounts of these financial assets and liabilities are reasonably
approximate fair value, either due to their short-term nature or that they are floating
rate instruments that are re-priced to market interest rates on or near the reporting
date.
(ii) Amounts due from subsidiary companies, loans to/from subsidiary companies,
finance lease obligations and fixed rate bank loans
The fair values of these financial instruments are estimated by discounting the
expected future cash flows at market incremental lending rate for similar types of
lending, borrowing or leasing arrangements at the reporting date.
(iii) Derivatives
The fair values of financing of customers are estimated based on the expected
future cash flows of contractual instalment payments, discounted at applicable and
prevailing rates at the reporting date offered for similar facilities to new customers
with similar credit profiles. In respect of non-performing financing, the fair values
are deemed to approximate the carrying values, which are net of individual
assessment allowance for bad and doubtful financing.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 341
Fair value of investment properties have been generally derived using the
investment method and market comparison approach. The inputs used for the
determination of fair value of investment properties are categorised as Level 3.
Investment method entails the capitalisation of the net rent from a property at a
suitable rate of return. Net rent is the balance sum after deducting service charge,
property tax and a reasonable percentage for vacancy from the gross rent. The
significant unobservable inputs are market rental rate, outgoings, vacancy rate,
term yield and reversionary yield.
Fair value for quoted equity shares in Malaysia is determined based on the quoted
(unadjusted) market prices in active markets for identical instruments.
Fair value for unquoted private debt securities and Malaysian government
investment certificates are determined based on the Bond Pricing Agency Malaysia
bid prices adjusted by the accretion of discount or amortisation of premium.
Fair value for unquoted equity shares in Malaysia and defaulted foreign Islamic
corporate sukuk are generally determined using the discounted cash flow method,
which approximates to the fair value. The inputs used for the determination of fair
value are categorised as Level 3. An increase/decrease in the adjustments for
unobservable inputs will decrease/increase the loss/profit after tax of the Group.
(vii) Investment securities: financial assets at fair value through profit or loss
Fair value of investment in private equity funds have been generally derived using
the net asset value approach. The Group determined that the reported net asset
value represents the fair value as at reporting date. The inputs used for the
determination of fair value are categorised as Level 3. An increase/decrease in the
adjustments for unobservable inputs will decrease/increase the loss/profit after tax
of the Group.
DRB-HICOM BERHAD
342 ANNUAL REPORT 2017
The Group and the Company are exposed to financial risks arising from their operations and the use
of financial instruments. The key financial risks include credit risk, liquidity risk, interest rate risk,
foreign exchange currency risk and market price risk. The Board of Directors reviews and sets
policies and procedures for the management of these risks. The Risk Committee in accordance with
the Group’s Enterprise Risk Management framework provides independent oversight to the
effectiveness of the risk management process.
It is, and has been throughout the current and previous financial year, the Group’s policy that no
derivatives shall be undertaken except for the use as hedging where appropriate and cost-efficient.
The Group and the Company do not apply hedge accounting.
The following sections provide details regarding the Group’s and the Company’s exposure to the
above-mentioned financial risks and the objectives, policies and processes for the management of
these risks.
Credit risk is the potential loss arising from customers or counterparties failing to meet their
financial contractual obligations. The Group seeks to control credit risk by ensuring its
customers or counterparties have sound financial standing and credit history. The Group has
no significant concentration of credit risk due to its diverse customer base and the maximum
exposure to credit risk is represented by the carrying amount of financial instruments.
Liquidity risk is the risk that the Group or the Company will encounter difficulty in meeting
financial obligations due to shortage of funds. The Group’s and the Company’s exposure to
liquidity risk arises primarily from mismatches of the maturities of financial assets and
liabilities. The Group’s and the Company’s objective is to maintain a balance between
continuity of funding and flexibility through the use of stand-by credit facilities.
The table below summarises the maturity profile of the Group’s and the Company’s liabilities
at the reporting date based on contractual undiscounted repayment obligations.
On demand
or within 1 1 to 5 Over 5
year years years Total
RM’000 RM’000 RM’000 RM’000
Group
2017
Financial liabilities:
Bills and acceptances
payable 9,196 - - 9,196
Deposits from customers 18,979,279 458,439 - 19,437,718
Deposits and placements
of banks and other
financial institutions 561,654 - - 561,654
Banking related liabilities 19,550,129 458,439 - 20,008,568
DRB-HICOM BERHAD
ANNUAL REPORT 2017 343
On demand
or within 1 1 to 5 Over 5
year years years Total
RM’000 RM’000 RM’000 RM’000
Group
2017 (Continued)
Financial liabilities:
Bank borrowings 2,453,374 4,361,904 128,242 6,943,520
Derivative liabilities 64,864 - - 64,864
Trade and other payables 6,420,456 - - 6,420,456
Total undiscounted
financial liabilities 28,488,823 4,820,343 128,242 33,437,408
2016
Financial liabilities:
Bills and acceptances
payable 29,350 - - 29,350
Deposits from customers 19,026,668 71,598 - 19,098,266
Deposits and placements
of banks and other
financial institutions 422,252 - - 422,252
Banking related liabilities 19,478,270 71,598 - 19,549,868
Bank borrowings 2,811,874 4,126,234 761,888 7,699,996
Derivative liabilities 98,346 - - 98,346
Trade and other payables 6,155,527 - - 6,155,527
Total undiscounted
financial liabilities 28,544,017 4,197,832 761,888 33,503,737
Company
2017
Financial liabilities:
Trade and other payables 1,569,910 - - 1,569,910
Bank borrowings 332,796 1,703,994 - 2,036,790
Total undiscounted
financial liabilities 1,902,706 1,703,994 - 3,606,700
DRB-HICOM BERHAD
344 ANNUAL REPORT 2017
On demand
or within 1 1 to 5 Over 5
year years years Total
RM’000 RM’000 RM’000 RM’000
Company
2016
Financial liabilities:
Trade and other payables 1,741,705 - - 1,741,705
Bank borrowings 798,855 1,401,920 220,727 2,421,502
Total undiscounted
financial liabilities 2,540,560 1,401,920 220,727 4,163,207
Interest rate risk is the risk that the fair value or future cash flows of the Group’s and the
Company’s financial instruments will fluctuate because of changes in market interest rates.
The Group’s and the Company’s exposure to interest rate risk arises primarily from their
loans and borrowings at floating rates. The Group’s policy is to manage interest cost using a
mix of fixed and floating rate debts.
The following table demonstrates the sensitivity of the Group’s and of the Company’s
(loss)/profit after tax to a reasonably possible change in 50 basis points to interest rate, with
all other variables held constant.
The assumed movement in basis points for interest rate sensitivity analysis is based on the
currently observable market environment.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 345
Foreign currency risk is the risk that the fair value or future cash flows of a financial
instrument will fluctuate because of changes in foreign exchange rates. The Group is
exposed to currency risk as a result of the foreign currency transactions entered into in
currencies other than its functional currency. Foreign exchange exposures in transactional
currencies other than its functional currency of the operating entities are kept to an
acceptable level. Material foreign currencies transaction exposures are hedged, mainly with
forward foreign exchange contracts.
Market price risk is the risk that the fair value of future cash flows of the Group’s financial
instruments will fluctuate because of changes in market prices (other than interest or
exchange rates).
The Group is exposed to equity price risks mainly arising from quoted shares held by the
Group. Quoted shares are mainly listed on Bursa Malaysia Securities Berhad. These
instruments are classified as financial assets designated at fair value through profit or loss
and available-for-sale.
At the end of the reporting date, if the quoted shares on Bursa Malaysia had been 10%
higher or lower, with all other variables held constant, the Group’s loss after tax would have
been approximately RM8,287,000 lower/higher (2016: RM10,144,000 lower/higher), arising
as a result of an increase/decrease in the fair values of the quoted shares.
DRB-HICOM BERHAD
346 ANNUAL REPORT 2017
61 CAPITAL MANAGEMENT
The primary objective of the Group’s capital management is to ensure that it maintains a strong
credit rating and healthy capital ratios in order to support its business and maximise shareholders’
value. The Group manages its capital structure and makes adjustments to it, in light of changes in
economic conditions.
The Group monitors capital using gearing ratio, which is total interest bearing debts divided by total
equity. Total debts is equivalent to total bank borrowings (including current and non-current
borrowings) as shown in the consolidated statement of financial position. The Group’s policy is to
keep the gearing ratio at an acceptable level.
2017 2016
(Restated)
Note RM’000 RM’000
Group
Short term borrowings excluding deferred liability 44 2,188,368 2,561,252
Long term borrowings 38 4,105,407 4,303,493
Total bank borrowings 6,293,775 6,864,745
Company
Short term borrowings excluding deferred liability 44 245,631 708,694
Long term borrowings 38 1,538,388 1,405,632
Total bank borrowings 1,784,019 2,114,326
Carrying
amount FVTPL L&R HTM AFS
Note RM’000 RM’000 RM’000 RM’000 RM’000
Group
Financial assets
2017
Investment securities 23 6,517,120 197,383 - 142,168 6,177,569
Trade and other receivables (excluding amounts
due from customers on contracts, accrued
billings, prepayments and advances to suppliers
included in other receivables) 29 2,749,382 - 2,749,382 - -
Banking related assets
- Cash and short-term funds 32 1,049,925 - 1,049,925 - -
- Financing of customers 25 14,711,816 - 14,711,816 - -
- Statutory deposit with Bank Negara Malaysia 26 698,636 - 698,636 - -
Short term deposits 30 1,332,531 - 1,332,531 - -
Cash and bank balances 31 1,544,331 - 1,544,331 - -
Derivative assets 33 61,494 61,494 - - -
DRB-HICOM BERHAD
ANNUAL REPORT 2017
347
348
Carrying
amount FVTPL L&R HTM AFS
Note RM’000 RM’000 RM’000 RM’000 RM’000
Group
Financial assets (Continued)
2016
Investment securities 23 6,073,331 186,355 - 140,607 5,746,369
Trade and other receivables (excluding amounts
due from customers on contracts, accrued
billings, prepayments and advances to suppliers
included in other receivables) 29 2,219,925 - 2,219,925 - -
Banking related assets
- Cash and short-term funds 32 1,069,101 - 1,069,101 - -
- Financing of customers 25 14,327,376 - 14,327,376 - -
- Statutory deposit with Bank Negara Malaysia 26 703,261 - 703,261 - -
Short term deposits 30 1,420,553 - 1,420,553 - -
Cash and bank balances 31 550,999 - 550,999 - -
Derivative assets 33 40,951 40,951 - - -
DRB-HICOM BERHAD
ANNUAL REPORT 2017 349
Carrying
amount FVTPL OL
Note RM’000 RM’000 RM’000
Group
Financial liabilities
2017
Trade and other payables (exclude
progress billings and amounts due
to customers on contracts) 43 6,299,678 - 6,299,678
Bank borrowings (excluding deferred
liability) 38 & 44 6,293,775 - 6,293,775
Banking related liabilities
- Deposits from customers 42 19,397,894 - 19,397,894
- Deposits and placements of banks
and other financial institutions 45 561,654 - 561,654
- Bills and acceptances payable 46 9,196 - 9,196
Derivative liabilities 33 64,864 64,864 -
2016
Trade and other payables (exclude
progress billings and amounts due
to customers on contracts) 43 6,154,411 - 6,154,411
Bank borrowings (excluding deferred
liability) 38 & 44 6,864,745 - 6,864,745
Banking related liabilities
- Deposits from customers 42 19,093,655 - 19,093,655
- Deposits and placements of banks
and other financial institutions 45 442,252 - 442,252
- Bills and acceptances payable 46 29,350 - 29,350
Derivative liabilities 33 98,346 98,346 -
DRB-HICOM BERHAD
350 ANNUAL REPORT 2017
Carrying
amount L&R OL
Note RM’000 RM’000 RM’000
Company
Financial assets
2017
Trade and other receivables
(excluding prepayments) 29 1,222,548 1,222,548 -
Short term deposits 30 223,771 223,771 -
Cash and bank balances 31 33,707 33,707 -
2016
Trade and other receivables
(excluding prepayments) 29 1,146,015 1,146,015 -
Short term deposits 30 239,534 239,534 -
Cash and bank balances 31 11,909 11,909 -
Financial liabilities
2017
Trade and other payables 43 1,569,910 - 1,569,910
Bank borrowings 38 & 44 1,784,019 - 1,784,019
2016
Trade and other payables 43 1,741,705 - 1,741,705
Bank borrowings 38 & 44 2,114,326 - 2,114,326
The financial statements have been approved for issue in accordance with a resolution of the Board
of Directors on 10 July 2017.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 351
The breakdown of the retained earnings of the Group and of the Company as at 31 March 2017 into
realised and unrealised earnings is presented as follows:
Group Company
2017 2016 2017 2016
(Restated)
RM’000 RM’000 RM’000 RM’000
Signed on behalf of the Board in accordance with a resolution of the Directors dated 10 July 2017.
BRIG. GEN. (K) TAN SRI DATO’ SRI (DR.) HAJI MOHD KHAMIL BIN JAMIL
BRIG. GEN. (K) TAN SRI DATO’ SRI (DR.) HAJI MOHD KHAMIL BIN JAMIL
BRIG. GEN.
BRIG. GEN. (K)
Chairman
Chairman (K) TAN
TAN SRI
SRI DATO’
DATO’ SRI
SRI (DR.) HAJI MOHD
(DR.) HAJI MOHD KHAMIL
KHAMIL BIN
BIN JAMIL
JAMIL
Chairman
BRIG. GEN. (K) TAN SRI DATO’ SRI (DR.) HAJI MOHD KHAMIL BIN JAMIL
Chairman
Chairman
BRIG. GEN. (K) TAN SRI DATO’ SRI (DR.) HAJI MOHD KHAMIL BIN JAMIL
Chairman
DATO’ SRI SYED FAISAL ALBAR BIN SYED A.R. ALBAR
DATO’ SRI SYED FAISAL ALBAR BIN SYED A.R. ALBAR
Group
DATO’Managing
DATO’
Group SRI SYEDDirector
SRI SYED
Managing FAISAL ALBAR
FAISAL
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BIN SYED
SYED A.R. ALBAR
A.R. ALBAR
Group Managing
DATO’
Group Managing Director
FAISAL ALBAR BIN SYED A.R. ALBAR
SRI SYEDDirector
Group Managing Director
STATUTORY DECLARATION
DATO’ SRI SYED FAISAL ALBAR BIN SYED A.R. ALBAR
Group Managing
STATUTORY Pursuant
DirectorTo Section
DECLARATION PURSUANT 251(1)(b)
TO Of The Companies Act 2016
STATUTORY DECLARATION PURSUANT TO
SECTION
STATUTORY
STATUTORY 251(1)(b) OF THE COMPANIES
DECLARATION
DECLARATION PURSUANTACT
PURSUANT TO 2016
TO
SECTION 251(1)(b) OF THE COMPANIES ACT 2016
SECTION 251(1)(b)
SECTION 251(1)(b)
STATUTORY OF THE COMPANIES
OF THE COMPANIES
DECLARATION PURSUANT ACT ACT 2016
TO 2016
I, Amalanathan Thomas, the officer primarily responsible for the financial management of DRB-HICOM
SECTION
I, Amalanathan251(1)(b) OF THE
Thomas, theCOMPANIES ACTresponsible
officer primarily 2016 for the financial management of DRB-HICOM
Berhad, do solemnly
I, Amalanathan
Amalanathan and sincerely
Thomas, the officerdeclare
officer that the
primarily financial for
responsible statements set outmanagement
the financial
financial on pages 168 of to 357 are, in
DRB-HICOM
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I, do solemnly and sincerely
Thomas, the declare that responsible
primarily the financial for
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the set out on pages 168
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DRB-HICOM
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my opinion, correct and I make this solemn declaration conscientiously believing the same to be true, and by
I, Amalanathan
virtue Thomas,
of the provisions of the theStatutory
officer primarily responsible
Declarations Act 1960.for the financial management of DRB-HICOM
Berhad, do solemnly and sincerely declare that the financial statements set out on pages 168 to 357 are, in
my opinion, correct and I make this solemn declaration conscientiously believing the same to be true, and by
virtue of the provisions of the Statutory Declarations Act 1960.
AMALANATHAN THOMAS
AMALANATHAN THOMAS
AMALANATHAN THOMAS
AMALANATHAN THOMAS
Subscribed and solemnly declared
declared by
by the
the abovenamed
abovenamed Amalanathan
Amalanathan Thomas
Thomas at
at Shah
Shah Alam
Alam in
in Malaysia
Malaysia on
AMALANATHAN THOMAS
Subscribed and solemnly on
10
10 July 2017.
Subscribed and solemnly
July 2017. solemnly declared
declared by
by the
the abovenamed
abovenamed Amalanathan
Amalanathan Thomas
Thomas at
at Shah
Shah Alam
Alam in
in Malaysia
Malaysia on
on
Subscribed and
10 July 2017.
10 July 2017.
Subscribed
AMALANATHANand solemnly
THOMAS declared by the abovenamed Amalanathan Thomas at Shah Alam in Malaysia on
10 July 2017.
Subscribed
Before me, and solemnly declared by the abovenamed Amalanathan Thomas at Shah Alam in Malaysia on
Before
10 July me,
2017.
Commissioner
Before me,
Before me,
Commissioner for
for Oaths
Oaths
Commissioner
Commissioner
Before me, for
for Oaths
Oaths
Commissioner for Oaths 191
191
Before me, 191
191
DRB-HICOM BERHAD
ANNUAL REPORT 2017 353
203430-W
Opinion
We have audited the financial statements of DRB-HICOM Berhad, which comprise the statements of financial position as at 31
March 2017 of the Group and of the Company, and the statements of comprehensive income, statements of changes in equity and
statements of cash flows of the Group and of the Company for the year then ended, and a summary of significant accounting policies
168 to 356.
and other explanatory notes, as set out on pages 174 350
In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Group and of the
Company as at 31 March 2017, and of their financial performance and their cash flows for the year then ended in accordance with
Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia.
We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our
responsibilities under those standards are further described in the Auditors’ responsibilities for the audit of the financial statements
section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
We are independent of the Group and of the Company in accordance with the By-Laws (on Professional Ethics, Conduct and
Practice) of the Malaysian Institute of Accountants (“By-Laws”) and the International Ethics Standards Board for Accountants’ Code
of Ethics for Professional Accountants (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance with the
By-Laws and the IESBA Code.
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the Group and the Company for the year ended 31 March 2017. These matters were addressed in the context of our
audit of the financial statements of the Group and the Company as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is
provided in that context.
We have fulfilled the responsibilities described in the Auditors’ responsibilities for the audit of the financial statements section of our
report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to
our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial
statements.
192
DRB-HICOM BERHAD
354 ANNUAL REPORT 2017
203430-W
(Refer to Note 2.22, Note 13, Note 21 and Note 56 to the financial statements)
As at 31 March 2017, the carrying amounts of the property, plant and equipment and intangible assets of a Malaysian
automotive subsidiary and a foreign automotive subsidiary amounted to RM1,960,939,000 and RM500,422,000
respectively.
The continued losses reported by these automotive companies indicated that the carrying amount of these property, plant
and equipment and intangible assets may be impaired. Accordingly, the Group performed an impairment test of these
property, plant and equipment and intangible assets by estimating the recoverable amount.
Due to the significance of the carrying amounts of the property, plant and equipment and intangible assets and the
judgements involved in estimating the recoverable amounts of these assets, we have identified these to be areas of audit
focus.
The management engaged a firm of independent valuers to estimate the recoverable amount of the property, plant
and equipment and intangible assets of a Malaysian automotive subsidiary based on the fair values of these
assets less costs of disposal. When estimating the fair values of these assets, the objective is to estimate the price
that would be received from the sale of these assets in an orderly transaction between market participants at the
reporting date under current market conditions.
Our audit procedures focused on the valuations performed by a firm of independent valuers, which included
amongst others the following procedures:
We considered the objectivity, independence and expertise of the firms of independent valuers;
We obtained an understanding of the methodology adopted by the independent valuers in estimating the fair
value of these assets and assessed whether such methodology is consistent with those used in the industry;
As part of our evaluations of the fair values of these assets, we had discussions with the independent valuers
to obtain an understanding of the related market data used as input to the valuation models; and
We assessed whether the adjustment factors applied to the market data in arriving at fair values of the assets
were within a range commonly accepted by the industry.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 355
203430-W
(Refer
2. to Note Impairment
2.9, Note 25 of
andBanking
Note 56related
to the financial
assets –statements)
financing of customers
194
DRB-HICOM BERHAD
356 ANNUAL REPORT 2017
203430-W
As of 31 March 2017, the provisions for warranty and provision for claims from suppliers of the Group amounted to
RM186,482,000 and RM178,862,000 respectively.
A provision by its nature is more uncertain than most other items in the statement of financial position. The estimates of the
outcome and financial effects are determined by the judgement of the management, supplemented by experience from
similar transactions. The evidence considered will also include any additional evidence provided by events after the
reporting period. Accordingly, we consider this area to be an area of audit focus.
We obtained an understanding of the relevant internal controls of the Group over the estimation of provisions for
warranty;
We read the terms of the sales contracts to determine the Group’s obligations for the provision of warranty for
vehicles sold; and
We assessed whether the assumptions on which the provision for warranty are based are consistent with
historical trends and adjusted to take into consideration any relevant changes which arose during the current
year.
We obtained an understanding of the relevant internal controls of the Group over the estimation of provisions for
claims from suppliers;
We discussed with the management to obtain an understanding of the future vehicle production plans and the
estimated purchases of vehicle parts;
We compared such plans to available supporting evidences such as historical sales data and economic outlook;
We assessed whether the assumptions applied in estimating the provision for claims from suppliers were
consistent with the management’s future vehicle production plans and the estimated purchases of vehicle parts;
and
We reviewed the arithmetical accuracy of management’s computation on the provision for claims from suppliers.
195
DRB-HICOM BERHAD
ANNUAL REPORT 2017 357
203430-W
As at 31 March 2017, the carrying amount of the Company’s investment in an automotive subsidiary was
RM2,214,154,000.
The history of continued losses and the depleting shareholders’ funds reported by the Company’s automotive subsidiary,
indicated that the carrying amount of the Company’s cost of investment in the automotive subsidiary may be impaired.
Accordingly, the management of the Company performed an impairment test on its investment. The aforementioned
impairment review gave rise to an impairment loss of investment in an automotive subsidiary of RM335,154,000 for the
year ended 31 March 2017.
The management of the Company estimated the recoverable amount of its investment in the automotive subsidiary based
on fair value less cost of disposal. When estimating the fair value of the automotive subsidiary, the objective is to estimate
the price that would be received in an orderly transaction between market participants at the reporting date under current
market conditions. Given the highly subjective nature of the estimation process, we identified the impairment assessment
as an area of audit focus.
Our audit procedures focused on the valuations performed by firms of independent valuers, which included amongst others
the following procedures:
We considered the objectivity, independence and expertise of the firms of independent valuers;
We obtained an understanding of the methodology adopted by the independent valuers in estimating the fair
value of this investment and assessed whether such methodology is consistent with those used in the
industry;
As part of our evaluations of the fair values of this investment, we had discussions with the independent
valuers to obtain an understanding of the related market data used as input to the valuation models; and
We assessed whether the adjustment factors applied to the market data in arriving at fair values of this
investment were within a range commonly accepted by the industry.
196
DRB-HICOM BERHAD
358 ANNUAL REPORT 2017
203430-W
Information other than the financial statements and auditors’ report thereon
The directors of the Company are responsible for the other information. The other information comprises the information included in
the Group’s 2017 Annual Report, but does not include the financial statements of the Group and of the Company and our auditors’
report thereon.
Our opinion on the financial statements of the Group and of the Company does not cover the other information and we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements of the Group and of the Company or our
knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required
to report that fact. We have nothing to report in this regard.
The directors of the Company are responsible for the preparation of financial statements of the Group and of the Company that give
a true and fair view in accordance with Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia.
The directors are also responsible for such internal control as directors determine is necessary to enable the preparation of financial
statements of the Group and of the Company that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements of the Group and of the Company, the directors are responsible for assessing the Group’s and
the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless directors either intend to liquidate the Group or the Company to cease operations, or have no
realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements of the Group and of the Company as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved
standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 359
203430-W
As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing, we
exercise professional judgement and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial statements of the Group and of the Company, whether
due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient
and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is
higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the Company’s internal
control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the
Group’s or the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditors’ report to the related disclosures in the financial statements of the Group and of the
Company or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group or the Company to
cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements of the Group and of the Company, including
the disclosures, and whether the financial statements of the Group and of the Company represent the underlying transactions
and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the
Group to express an opinion on the financial statements of the Group. We are responsible for the direction, supervision and
performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit
findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence,
and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and
where applicable, related safeguards.
198
DRB-HICOM BERHAD
360 ANNUAL REPORT 2017
203430-W
From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the
financial statements of the Group and of the Company for the current year and are therefore the key audit matters. We describe
these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing
so would reasonably be expected to outweigh the public interest benefits of such communication.
In accordance with the requirements of the Companies Act 2016 in Malaysia, we report that the subsidiaries of which we have not
acted as auditors, are disclosed in Note 3 to the financial statements.
The supplementary information set out in Note 64 on page 357 351 is disclosed to meet the requirement of Bursa Malaysia Securities
Berhad and is not part of the financial statements. The Directors are responsible for the preparation of the supplementary information
in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of
Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants
("MIA Guidance") and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared,
in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad.
Other matters
This report is made solely to the members of the Company, as a body, in accordance with Section 266 of the Companies Act 2016 in
Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.
199
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DRB-HICOM BERHAD
364 ANNUAL REPORT 2017
ANALYSIS OF SHAREHOLDINGS
As At 30 June 2017
DISTRIBUTION OF SHAREHOLDINGS
Number of % of Number of % of
Size of Shareholdings Shareholders Shareholders Shares Held Issued Shares
Note:
* Less than 0.01%
Number of % of
No. Name Shares Held Issued Shares
Number of % of
No. Name Shares Held Issued Shares
Tan Sri Dato’ Seri Syed Mokhtar Shah - - 1,081,061,741 55.92 55.92
bin Syed Nor (N1)
Note:
(N1)
Deemed interest by virtue of his interest in Etika Strategi Sdn. Bhd. pursuant to Section 8 of the Companies Act 2016.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 367
Note:
* Less than 0.01%
Save as disclosed above, none of the other Directors of the Company has any interest in shares in the Company or its
related corporations.
Note:
* Less than 0.01%
Save as disclosed above, none of the other Senior Management of the Company has any interest in shares in the
Company or its related corporations.
DRB-HICOM BERHAD
368 ANNUAL REPORT 2017
MATERIAL PROPERTIES OF
DRB-HICOM GROUP
As At 31 March 2017
Group
Net book
Approximate value as at
age of Approx. 31 March 2017
Location Description/existing use building Tenure area RM’000
1 HS(D) B.P. 5653 and 5654 Automobile plant, 14 years Freehold 5,150,600 489,181
Bil PT 16162 and 10163 administrative building and sq.m
Mukim of Ulu Bernam Timur sports complex facilities. (Land)
District of Batang Padang
Perak Darul Ridzuan
2 Lots No. 39617, 39619 and 46970 Main office, main factory, engine 20-32 years Freehold 816,100 456,089
Mukim of Damansara factory, medium volume factory, sq.m
District of Petaling canteen buildings, sports facilities, (Land)
Selangor Darul Ehsan additional R&D laboratories building,
car park for production cars and staff
and semi-high speed test track.
3 PTD 176399 to 176523, Land held for residential and - Freehold 2,083,996 412,165
176536 to 177094, 177101, 177108, 177109, commercial development. sq.m
177114, 177115, 177127, 177137, 177138 (Land)
and 177638
Mukim Tebrau
Daerah Johor Bahru
Johor Darul Ta’zim
4 HS(D) 4546, PT 13225 and University college campus and hostel. 5 years Leasehold 262,290 233,478
HS(D) 4609, PT 2743 99 years sq.m
Daerah Pekan, Mukim Pekan expiring in (Land)
Pahang Darul Makmur years 2109
and 2112
5 Lot No. 77170 and individual titles from Land held for residential and
master titles (Lots No. 77174 and 77175) commercial development. - Freehold 444,215 198,913
Mukim and District of Klang sq.m
Selangor Darul Ehsan (Land)
DRB-HICOM BERHAD
370 ANNUAL REPORT 2017
Group
Net book
Approximate value as at
age of Approx. 31 March 2017
Location Description/existing use building Tenure area RM’000
6 Lots No. 63004 (PT 772), 63108 (PT 1828 & 1829) Hotel, golf course and club house. 23-24 years Freehold 1,489,836 182,957
63109 (PT 465), 63110 (PT 466), sq.m
63111 (PT 467) and 63112 (PT 468) (Land)
Town of Glenmarie, Mukim Damansara
District of Petaling
Selangor Darul Ehsan
7 GM 1867 Lot 1468, 94 units chalet & marina and 17-20 years Freehold and 1,565,651 155,427
HS(D) 423-588 (PT 919-1088) land held for development. Leasehold sq.m
Mukim Kedawang expiring in (Land)
Daerah Langkawi years 2054
Kedah Darul Aman
8 HS(D) 63928, PT 5689 and Industrial land with office and building. 21 years Freehold 650,360 147,174
HS(D) 63929, PT 5690 sq.m
Mukim Gurun (Land)
Daerah Kuala Muda
Kedah Darul Aman
9 Land adjacent to Potash Lane Factory, engineering facilities, office 49 years Freehold 584,040 140,944
Hethel, Norwich, Norfolk NR 14 8EZ and test track. sq.m
England and Land North of Browic (Land)
10 Lots 348 (HSD 17814), 350 (HSD 17815) and Land held for future development. - Freehold 809,371 130,789
351 (HSD 17817) sq.m
Bandar Kota Perdana (Land)
Mukim Bukit Kayu Hitam
Daerah Kubang Pasuh, Kedah
Make Today
Count Because
Today Is The
First Day Of
The Future.
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FORM OF PROXY DRB-HICOM BERHAD
(Company No.: 203430-W)
ANNUAL GENERAL MEETING
(Incorporated in Malaysia)
or failing him/her, the Chairman of the Meeting, as my/our proxy to attend and vote for me/us on my/our behalf at the Twenty-Seventh
Annual General Meeting (“27th AGM”) of the Company to be held at Glenmarie Ballroom, Holiday Inn Kuala Lumpur Glenmarie
(Tel: 03-7803 1000), No. 1, Jalan Usahawan U1/8, Seksyen U1, 40250 Shah Alam, Selangor Darul Ehsan on Wednesday, 30 August 2017 at
9.00 a.m. and at any adjournment thereof.
My/our proxy is to vote on the resolutions as indicated by an “X” in the appropriate spaces below. If this form is returned without any
indication as to how the proxy shall vote, the proxy shall vote or abstain as he/she thinks fit.
5. Approval of Directors’ fees for the financial year ended 31 March 2017
6. Approval of Directors’ fees from 1 April 2017 until the conclusion of the next AGM
7. Approval of Directors’ benefits from 31 January 2017 until the conclusion of the
next AGM
......................................................................
Signature(s) of shareholder(s) or
Common Seal of corporate shareholder
NOTES :
(a) A member entitled to attend the meeting may appoint not more than two (2) proxies (f) A proxy appointed to attend and vote at the meeting shall have the same rights as the
who may but need not be a member of the Company. member to speak at the meeting. The lodging of a form of proxy does not preclude
a member from attending and voting in person at the meeting should the member
(b) Where a member of the Company is an authorised nominee, as defined under the subsequently decide to do so.
Securities Industry (Central Depositories) Act 1991, it may appoint not more than
two (2) proxies in respect of each securities account it holds to which ordinary shares (g) The instrument appointing a proxy together with the power of attorney or other
in the Company are credited. authority, if any, under which it is signed or a certified copy thereof, shall be
deposited at the office of the Share Registrar, Symphony Share Registrars Sdn. Bhd.,
(c) For an exempt authorised nominee which holds ordinary shares in the Company for Level 6, Symphony House, Pusat Dagangan Dana 1, Jalan PJU 1A/46, 47301 Petaling
multiple beneficial owners in one (1) securities account (omnibus account), there is no Jaya, Selangor Darul Ehsan (Tel: 03-7849 0777) not less than forty-eight (48)
limit to the number of proxies which the exempt authorised nominee may appoint in hours before the time set for holding this meeting or adjourned meeting, or in the
respect of each omnibus account it holds. case of a poll, not less than twenty-four (24) hours before the time appointed for the
taking of a poll, and in default the instrument of proxy shall not be treated as valid.
(d) The instrument appointing a proxy shall be in writing under the hand of the appointor
or his attorney duly authorised in writing or, if the appointor is a corporation, either (h) For purpose of determining a member who shall be entitled to the 27th AGM, the
under its common seal or under the hand of an officer or attorney duly authorised in Company shall be requesting Bursa Malaysia Depository Sdn. Bhd. to issue a General
writing. Meeting Record of Depositors as at 23 August 2017. Only a depositor whose name
appears therein shall be entitled to attend the said meeting or appoint a proxy(ies) to
(e) Where a member/an authorised nominee/an exempt authorised nominee appoints attend and vote on such depositor’s behalf.
proxies, the proportion of shareholdings to be represented by each proxy must be
specified in the instrument appointing the proxies. If the form of proxy is returned
without an indication as to how the proxy shall vote on any particular matter, the
proxy may exercise his/her discretion as to whether to vote on such matter and if
so,how.
DRB-HICOM Berhad (203430-W)
www.drb-hicom.com