zarfarie binti aron 195645 ~ london biscuits bhd

1 ZARFARIE BINTI ARON (195645)

COMPANY: LONDON BISUITS BERHAD

PART I: BACKGROUND of COMPANIES

1.1 Main Activity

A home grown Malaysian company, London Biscuits Berhad

Group’s main business philosophy hinges on manufacturing and

marketing cakes and snack food which score high in terms of product

safety and quality. The company strongly believes that this is the only

way to ensure the customer satisfaction and loyalty to the product and the brand it embodies.

London Biscuits’ individually packed and ready to eat products can be divided into 2 main

categories namely:

i. Corn based snacks

ii. Cake products such as Swiss Rolls,

iii. Pie Cakes and Layer Cakes

In addition, London Biscuits also manufactures range assorted chocolate confectionery

including chocolate-coated peanuts and biscuits, pancake cookies, jelly and puddings, wafer

sticks, cup sticks and snack noodles.


1.2 Director’s Interest

According to the register of directors shareholdings, the interest of directors in office at the

end of the financial year in shares of the Company and related corporations during the

financial year ended 30th June, 2010 are follows:-

Numbers of ordinary shares of RM1 each

Shares in the company Balance at

1.7.2009

Bought Sold Balance at

30.6.2010

Dato' Sri Liew Kuek Hin, SSAP, DIMP, PJK, JP

(Chairman, Non-Executive, Non-Independent

Director)

- direct

- indirect

1,510,250

35,892,433

-

1,979,300

1,510,000

-

250

37,871,733

Datin Sri Lim Yook Lan

(Non-Executive, Non-Independent Director)

- direct

- indirect

224,487

37,178,196

-

1,979,300

-

1,510,000

224,487

37,647,496

Dato’ Sri Liew Yew Chung, SSAP, DIMP (Group Managing Director/ Group CEO)

- direct

- indirect

1,631,785

35,770,898

-

1,979,300

-

1,510,000

1,631,785

36,240,198

Dato’ Liew Yew Cheng, DIMP (Non-Executive, Non-Independent Director)

- direct

- indirect

75,231

37,327,452

-

1,979,300

-

1,510,000

75,231

37,796,752

Liew Yet Mei (Non-Executive, Non-Independent Director)

- direct

- indirect

39,671

37,363,012

-

1,979,300

-

1,510,000

39,671

37,832,312

Dato’ Liew Yet Lee, DIMP (Non-Executive, Non-Independent Director)

- direct

- indirect

39,671

37,363,012

-

1,979,300

-

1,510,000

39,671

37,832,312

Dato' Cheong Siew Kai, DJMK, AMS, JP (Independent Non-Executive Director)

- direct

- indirect

-

-

-

-

-

-

-

-

Huang Yan Teo, PIS, PPN (Independent Non-Executive Director)

- direct

- indirect

-

-

-

-

-

-

-

-

Leslie Looi Meng (Independent Non-Executive Director)

- direct

- indirect

-

-

-

-

-

-

-

-


1.3 Boards of Director

1. Dato’ Sri Liew Kuek Hin, SSAP, DIMP, PJK, JP

Malaysian, aged 71

Non-Independent Non-Executive Chairman

2. Datin Sri Lim Yook Lan

Malaysian, aged 71

Non-Independent Non-Executive Director

3. Dato’ Sri Liew Yew Chung, SSAP, DIMP

Malaysian, aged 40

Group Managing Director/Group CEO

4. Dato’ Liew Yew Cheng, DIMP

Malaysian, aged 37


5. Liew Yet Mei

Malaysian, aged 43


6. Dato’ Liew Yet Lee, DIMP

Malaysian, aged 36


7. Dato’ Cheong Siew Kai, DJMK, AMS, JP

Malaysian, aged 72

Independent Non-Executive Director

8. Huang Yan Teo, PIS, PPN

Malaysian, aged 63



9. Leslie Looi Meng

Malaysian, aged 40


1.4 Chairman Messages

1.4.1 Review of Performance

Group’s revenue for the financial year ended 30 June 2010 surged by RM39, 131,998 to

RM223,434,122, which represented a 21.23% increase over that achieved in the preceding

year of RM184,302,124. The Group continues to achieve commendable progressive

operating revenue. Internal targets set for management to go all out, not only to sustain our

current achievements but to improve substantially on it.

Profit After Income Tax attributable to the Group fell slightly by 6% to RM15, 064,018 as

compared to RM16, 027,316 achieved in the previous year. This is because the Group

“suffered” a slight hiccup of having had to write off certain amount against our investment in

Lay Hong Berhad in the year under review. If not for this mentioned write off, the Group

would have met our internal target of approximately RM20, 000,000 profits for the year

under review. The Board deliberated on this writes off and are of unanimous opinion to allow

for this painful stand as a matter of prudence and good accounting policy. With this behind

us, we now move forward exciting. Like an old Chinese saying goes, “BITTER

FIRST, SWEET TASTE LATER”.

Although the world is still in midst of global economic crisis, with ever rising cost of

production and against pressure from competitors and consumers pricing. Profit After

Income Tax went up by 61.6% from RM8, 422,511 to RM13,610,392.

The basic net earnings per share of the Group for the financial year, 2010 fell accordingly to

17.31sen (2009 – 20.54sen), based on the weighted average number of 96,031,500 ordinary

shares (2009 – 78,045,000) of RM1 each, in issue as at 30 June 2010.


As at 30 June 2010, Group’s shareholders’ equity stood at RM199, 330,061 (2009 - RM168,

662,503 ) whilst Group’s net tangible assets per share fell to RM1.94 in 2010 from RM2.00

per share in 2009.

1.4.3. Dividends

Difficult trading and business conditions and environment are still in year, ahead. The Board

is always constantly on the workout for a solution to conserve financial resources of the

Group to meet capital, operating and investing expenditure and at same time to reward our

shareholders for their faith, support and loyalty to the Group. This is the stance that your

Board has adopted consistently over the years. We have work out a “Win-Win” formulation

that should ensure a steady cash flow for the Group’s requirements at same time, able to

service our dividends to shareholders in an orderly manner in line with an improvement in

our resources. The Board has already declared an interim dividend of 1.5 sen (tax-exempt)

per share in respect of the financial year ended 30 June 2010, amounting to RM1,440,203,

which will be paid, by month end, on 26 November 2010.

1.5 Corporate Chart

London Biscuits Berhad

Group of Companies

Khee San Food Industries Sdn. Bhd.

Khee San Marketing Sdn. Bhd.

Kinos Food Trading Sdn. Bhd

Kim Choaw Sdn. Bhd,

Teck Pimg Chan Agriculture Sdn.

Bhd.

Mestika Arif Sdn. Bhd.

Teck Ping Chan (1976)

Sdn. Bhd.

100%

100%

100% 32.87%

100%

100%

100%

100% 100%

33.65%


1.6 Graphs for Five Years Group Financial Highlight.

-

5,000.00

10,000.00

15,000.00

20,000.00

25,000.00

2010 2009 2008 2007 2006

RM

YEAR

1.6.1. Profit After Income Tax Attributable to Equity

Holders of the Company

0

5

10

15

20

25

30

2010 2009 2008 2007 2006

RM

YEAR

1.6.2. Earnings Per Share (sen) (Fully diluted)

-

50,000.00

100,000.00

150,000.00

200,000.00

250,000.00

2010 2009 2008 2007 2006

1.6.3. Shareholers Fund

Shareholers Fund


PART II: COMPLIANCE with FRSs

2.1. FRS 3: Business Combination

The consolidated financial statements of this company include the financial statements of

their company and its subsidiary companies made up to the balance sheet date using the

purchase method of accounting.

Under this method, the results of the subsidiary companies acquired are included in the

consolidated financial statements from the dates of acquisition. Any excess of the cost of the

acquisition over the Group’s interest in the net fair value of identifiable assets, liabilities and

contingent liabilities represents goodwill.

Any excess of the Group’s interest in the net fair value of the identifiable assets, liabilities

and contingent liabilities over the cost of acquisition is recognised immediately in income

statement. All inter-company balances and transactions are eliminated on consolidation and

the consolidated financial statements reflect external transactions only.

This company has followed FRS 3, the consolidated financial statements and consolidated

balance sheet of this company can refer to page 39 – 44 in Annual Report London Biscuits

Berhad.

2.2. FRS 117: Leases

i) Finance Leases

If the assets acquired by way of finance leases are stated at an amount equal to the

lower of their fair values and the present value of the minimum lease payments at the

inception of the leases, less accumulated depreciation and impairment losses. The

corresponding liability is included in the balance sheet as borrowings. In calculating

the present value of the minimum lease payments, the discount factor used is the

interest rate implicit in the lease, when it is practicable to determine, otherwise, the

Group’s or Company's incremental borrowing rate is used. Any initial direct costs are

also added to the carrying amount of such assets.


According to the company, lease payments are apportioned between the finance costs

and the reduction of the outstanding liability. Finance costs, which represent the

difference between the total leasing commitments and the fair value of the assets

acquired, are recognised in income statement over the term of the relevant lease so as

to produce a constant periodic rate of charge on the remaining balance of the

obligations for each accounting period.

All other repairs and maintenance are charged to the income statement during the

financial period in which they are incurred.

Subsequent to recognition, property, plant and equipment are stated at cost as

modified by the revaluation of certain freehold land and buildings and certain plant

and machinery less accumulated depreciation and accumulated impairment loss, if

any. No depreciation is provided on freehold land, freehold land and buildings-in-

progress and plant and machinery under installation. All other property, plant and

equipment are depreciated on a straight line basis to write off the cost of each asset to

their residual value over the estimated useful lives of the assets concerned.

The principal annual rates used are as follows:-

Freehold buildings 1%

Plant & machinery 5%

Plant and machinery at group cost 6 2/3%

Motor vehicles 20%

Furniture & fittings 10%

Office & laboratory equipment 10%

Renovations & electrical fittings 10%

The Group and Company adopts a policy to revalue its freehold land and buildings

every 5 years from the date of last revaluation. Surplus arising from revaluation is

credited directly to revaluation reserve. Deficit in excess of the revaluation reserve

arising from previous revaluation is taken to the income statement.


The residual value, useful life and depreciation method are reviewed at each financial

year end to ensure that the amount, method and period of depreciation are consistent

with previous estimates and the expected pattern of consumption of the future

economic benefits embodied in the items of property, plant and equipment.

An item of property, plant and equipment is derecognised upon disposal or when no

future economic benefits are expected from its use or disposal. The difference

between the net disposal proceeds, if any and the net carrying amount is recognised in

income statement. Refer to note to the account no.3 in the page 59 – 60 in London

Biscuits Berhad Annual Report, see how this company discloses depreciation of assets

in their income statement and balance sheet.

ii) Operating Leases

Operating lease payments are recognised as an expense on a straight-line basis over the

term of the relevant lease. The aggregate benefit of incentives provided by the lessor is

recognised as a reduction of rental expense over the lease term on a straight-line basis.

In the case of a lease of land and buildings, the minimum lease payments or the up-front

payments made are allocated, whenever necessary, between the land and the buildings

elements in proportion to the relative fair values for leasehold interests in the land

element and buildings element of the lease at the inception of the lease. The up-front

payment represents prepaid lease payments and are amortised on a straight-line basis over

the lease terms.

Refer to the note account no.25

Lease Commitment

Group and Company

2010 2009

RM RM

Within 1 year 1,526,052 -

Between 1 to 5 years 4,252,844 -

5,778,896 -


Refer Note to the Account no.4

Prepaid Lease Payments

Group 2010 2009

RM RM

At group cost:

At 1st July 6,377,900 6,373,590

Addittion 29,930 182,362

Ammortisation for the year (180,559) (178,052)

At 30th

June 6,227,271 6,377,900

The leasehold properties of the subsidiaries were revalued by a firm of professional valuers

Messrs Colliers Jordan Lee & Jaafar in financial year ended 30th June, 2005.

Had the leasehold land and buildings been carried at historical cost less accumulated

amortisation the carrying amount of the revalued assets as at 30th June, 2010 would be as

follows :

2.3. FRS 128: Investment in Association

Refer to note to the account no.7

Interest Associated Companies

2010 2009

Group RM RM

Leasehold land and buildings 4,046,211 4,106,365

Group 2010 2009

Cost

(RM)

Market Value

(RM)

Cost

(RM)

Market Value

(RM)

Quated shares in Malaysia, at cost 20,312,210 12,088,798 20,312,210 12,088,798


The associated companies, incorporated in Malaysia, are as follows:-

Effective

Name of Company Equity

2010

%

Interest

2009

%

Principal Activities

Lay Hong Berhad 24.59 24.59 Poultry farming and related activities and liquid eggs

processing

TPC Plus Berhad 33.65 - Poultry farming and related activities and liquid eggs

processing

As disclosed in Note 29(i) to the Financial Statements, the Company had as announced on

Bursa Malaysia Securities Berhad on 23rd August, 2010, the Company, had disposed of its

entire equity interest in Lay Hong Berhad, its associated company in the open market and via

off market transactions on a willing buyer willing seller basis for a total consideration of

RM11, 851,760, resulting in an impairment on this investment of RM4, 545,126 to the

Group.

This company also complies with this FRS which dislose the leases in their income statement

and balance sheet.

2.4. FRS 136: Impairment of Assets

The carrying values of assets in London Biscuits Berhad, other than inventories, are reviewed

for impairment when there is an indication that the assets might be impaired. Impairment is

Distibution of dividend (106,614) - (106,614) -

Impaiment of assets (4,545,126) - (130,424) -

Share of profit in associated

Companies

4,571,790

2,433,172

-

-

20,232,60 14,521,970 20,075,172 12,088,798

Market value

15940,982

7,960,540

15,940,982

7,960,540


measured by comparing the carrying values of the assets with their recoverable amounts. An

impairment loss is charged to the income statement immediately unless the asset is carried at

revalued amount. Any impairment loss of a revalued asset is treated as a revaluation decrease

to the extent of previously recognised revaluation surplus for the same asset.

Subsequent increase in the recoverable amount of an asset is treated as reversal of the

previous impairment loss and is recognised to the extent of the carrying amount of the asset

that would have been determined (net of depreciation) had no impairment loss been

recognised. The reversal is recognised in the income statement immediately, unless the asset

is carried at revalued amount. A reversal of an impairment loss on a revalued asset is credited

directly to revaluation surplus. However, to the extent that an impairment loss on the same

revalued asset was previously recognised as an expense in the income statement, a reversal of

that impairment loss is recognised as income in the income statement.


2.5. FRS 138: Intangible Assets

(i) Goodwill on Consolidation

Goodwill on consolidation represents the excess of the fair value of the purchase

consideration over the Group's share of the fair values of the identifiable net assets

of subsidiaries at the date of acquisition.

Goodwill on consolidation is retained in the consolidated balance sheet. The

carrying amount of the goodwill is reviewed annually and is written down for

impairment where it is considered necessary. The impairment value of goodwill is

taken to the consolidated income statement.

If after reassessment, the Group's interest in the fair values of the identifiable net

assets of the subsidiaries exceeds the cost of the business combinations, the excess

is recognised immediately in the consolidated income statement.


Refer to note to the account no.9 (i)

2010 2009

RM RM

Goodwill consolidation 11,568,174 4,714,098

Less: Accumulated amortization (508,627) (508,627)

At 1st July 11,059,547 4,205,471

Add: Arising from investment in subsidiary companies - 6,854,076

11,059,547 11,059,547 At 30th

June

(ii) Other Intangible Assets

Intangible assets acquired separately are measured on initial recognition at cost.

The cost of intangible assets acquired in a business combination is their fair values

as at the date of acquisition. Following initial recognition, intangible assets are

carried at cost less any accumulated amortisation and any accumulated

impairment losses. The useful lives of intangible assets are assessed to be either

finite or indefinite. Intangible assets with finite lives are amortised on a straight-

line basis over the estimated economic useful lives and assessed for impairment

whenever there is an indication that the intangible asset may be impaired. The

amortisation period and the amortisation method for an intangible asset with a

finite useful life are reviewed at least at each balance sheet date.

Intangible assets with indefinite useful lives are not amortised but tested for

impairment annually or more frequently if the events or changes in circumstances

indicate that the carrying value may be impaired either individually or at the cash-

generating unit level. The useful life of an intangible asset with an indefinite life is

also reviewed annually to determine whether the useful life assessment continues

to be supportable.


Refer to note to the account no.9 (ii)

2010 2009

Group RM RM

Leasehold land and buildings 4,046,211 4,106,365

2.6. FRS 140: Investment Properties

Investment properties are properties held either to earn rental income or for capital

appreciation or for both. Gain or losses arising from changes in the fair values of investment

properties are included in the income statement in the year in which they arise.

Investment properties are derecognised when they have either been disposed of or when the

investment property is permanently withdrawn from use and no future benefit is expected

from its disposal. On the derecognition of an investment property, the difference between the

net disposal proceeds and the carrying amount is charged to the income statement; any

amount in the revaluation reserve relating to the investment property is transferred to retained

earnings.


Investment Properties

2010 2009

Group RM RM

Fair Value, at 30th June 3,410,000 3,410,000


Note to the account no.20

GROUP COMPANY

Profit before income tax is arrived at after

charging (crediting)

2010 2009 2010 2009

RM RM RM RM

Auditors’ remuneration

Directors' remuneration

- Fees

- current directors

- past directors

- Salaries and allowances

- Attendance allowances

Rental of premises

Rental of motor vehicles

Rental of equipment

Staff costs

Depreciation (Note 3)

Property, plant & equipment

written off

Unrealised loss on foreign exchange

Amortisation of prepaid lease

payments (Note 4)

Impairment loss on investments

Allowance for doubtful debts

Lease rental

Workers’ quarters rental

Dividend paid

Allowance for doubtful debts

no longer required

Gain on disposal of investments

Realised gain on foreign exchange

Finance cost:

Interest paid for:-

- Bank overdrafts

- Hire-purchase

- Term loans

- Bankers' acceptances

- Revolving credit

- Others

Rental income

Gain on disposal of property,

250,000

290,150

10,613

1,569,700

69,000

337,796

607,411

10,920

15,220,299

9,865,174

-

6,509

180,559

4,774,668

456,258

785,618

30,470

-

-

(46,636)

(1,263,973)

1,216,569

2,206,022

2,366,547

2,037,516

170,346

195,781

8,192,781

(232,800)

204,000

280,500

-

1,541,700

65,000

512,054

-

10,920

15,499,778

8,243,295

267,726

171,143

178,052

3,745,501

50,824

-

-

-

(13,992)

(53,394)

(1,727,569)

1,313,761

1,350,610

4,973,311

2,068,774

779,954

48,849

10,535,259

(232,546)

150,000

118,000

-

1,569,700

69,000

223,376

284,536

-

6,761,631

6,283,940

-

-

-

359,966

-

785,618

-

2,617,500

-

-

(413,761)

841,368

1,440,580

2,366,547

1,188,468

-

195,781

6,032,744

-

120,000

108,000

1,541,700

65,000

230,404

-

-

6,012,757

6,039,299

-

-

-

3,790,915

-

-

-

-

(13,992)

(53,394)

(816,682)

1,012,820

1,069,445

4,973,311

1,714,203

589,916

48,849

9,408,544

-


plant and equipment

Dividend from Malaysian

quoted investments (gross)

Interest income

- Fixed and short term deposits

- Other interest

(876,011)

(247,404)

(19,642)

(19,812)

(1,095,667)

(12,925)

(67,449)

(65,961)

(876,010)

(247,404)

(19,642)

-

(1,095,667)

(675)

(67,449)

-

zarfarie binti aron 195645 ~ london biscuits bhd

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