PART A: EXPLANATORY NOTES AS PER MASB 26

A1.	Basis of preparation of interim financial reports

These interim financial statements are prepared in accordance with the Malaysian Accounting Standards Board (MASB) Standard No.26 “Interim Financial Reporting” and paragraph 9.22 of the Kuala Lumpur Stock Exchange Listing Requirements and should be read in conjunction with the company’s and its subsidiaries’ annual financial statements for the year ended 31st December 2002. 

The acquisition of the subsidiary companies pursuant to the corporate restructuring exercise in conjunction with the listing of Scomi Group Berhad on the Second Board of the Kuala Lumpur Stock Exchange was completed on 31st March 2003.  

The second quarter interim financial reports submitted on 11th August 2003 was based on a proforma basis which includes the three months pre-acquisition results of the subsidiaries.

The second quarter interim financial reports is now re-submitted to reflect the post-acquisition results of the company effective from 1st April 2003.

The accounting policies and presentation adopted for the interim financial statements are consistent with those adopted for the last annual audited financial statements.

A2.	Audit report

There were no audit qualifications on the annual financial statements for the year ended 31st December 2002.

A3.	Seasonal and cyclical factors 

The group’s results were not materially affected by any seasonal or cyclical factors.
	
A4.	Unusual and extraordinary items 

There were no exceptional and/or extraordinary items affecting assets, liabilities, equity, net income or cash during the current quarter and financial year-to-date under review.

A5.	Material changes in estimates

There were no material changes in estimates of amount reported during the quarter and financial year-to-date under review.

A6.	Issuance and repayment of debt and equity securities	

Save as disclosed in Note B8, there is no issuance or repayment of debt and equity securities during the quarter and financial year-to-date under review.
	
A7.	Dividend	s Paid

No dividends were paid during the current quarter and financial year-to-date under review.

A8.	Segment information 

	6 months ended   
30th June 2003
	
	Revenue		Profit before tax	
	RM ‘000
		RM ‘000	
Oil & Gas	34,771		5,587	
Transportation & Engineering	15,571		185	
Investment Holding 	   -		         (57)	
Total	50,342
		5,715	
Inter-segment elimination	(20)
		-	

Total	
50,322		
5,715	

A9.	Valuation of property, plant and equipment

The carrying value of property, plant and equipment has been brought forward without amendments from the annual audited financial statements for the year ended 31st December 2002.

A10.	Material events subsequent to the balance sheet date    

On 5th August 2003, Kota Minerals and Chemicals Sdn Bhd (“KMC”) entered into a Shareholders Agreement with Siam Synergy Co., Ltd (“SSC”) in relation to their investment into a joint venture company (“JVCO”) in Thailand. 

It is intended that the JVCO will be known as Siam-KMC Co., Ltd with an issued and paid-up share capital of 1,250,000 Baht (approximately RM 113,000) divided into 500,000 ordinary shares of which KMC and SSC have partially paid-up 2.50 Baht (RM0.226) per share in the following proportions:-

KMC	245,000 shares (49%)

SSC	255,000 shares (51%)

It is intended that the JVCO shall be involved in the provision of drilling fluids and engineering services and the supply of other related materials and chemicals such as completion equipment and production chemicals in Thailand and the Malaysia-Thailand Joint Development Area. 

Other than the above and as disclosed in Note B8, there were no material events subsequent to the end of the quarter and financial year-to-date under review that have not been reflected in the financial statements.

A11.   Changes in composition of the group

There were no changes in the composition of the Group during the quarter and financial year-to-date under review.

On 23rd March 2003, Kota Minerals & Chemicals Sdn Bhd acquired one (1) ordinary shares of USD1.00 each representing the entire issued and paid-up capital KMC Overseas (M) Limited for a total cash consideration of USD1.00.

A12.  Contingent liabilities

There were no material contingent liabilities for the group as at the date of this announcement.

A13.	Capital commitments 

	Authorised capital commitments not provided for in the financial statements as at 30th June 2003: 

	Approved and contracted for
RM’000		Approved but not contracted for
RM’000	
Building	-		615	
Plant and Machinery 	88		1,299	
Office Equipment, Furniture and Fittings	441		1,037	
Motor Vehicles	727		778	
Total	1,256		3,729	

A14.	Significant related party transactions

There were no significant related party transactions entered into in the quarter and financial year-to-date under review. 

     A15.  Comparison with preceding quarter’s results 
	
Comparative figures for the preceding year are not available as this is Scomi Group Berhad’s third quarterly report to the Kuala Lumpur Stock Exchange since its listing on 13th May 2003.

PART B: 	ADDITIONAL INFORMATION REQUIRED BY THE KUALA LUMPUR STOCK EXCHANGE LISTING REQUIREMENTS

B1.	Review of performance 
	
The group recorded revenue of RM50.32 million for the quarter under review, out of which the Oil and Gas Division and Transportation Engineering Division contributed to 69% and 31%, respectively, for the period under review. The profit after tax for the period ended 30th June 2003 was RM3.98 million which represents 30% of the 2003 consolidated profit after tax forecast net of pre-acquisition profits. 

              On a proforma basis, the group proforma revenue for the six months period ended 30th June 2003 was RM89.1 million. The group proforma profit after tax was RM7.8 million which represents 44% of the 2003 annual forecast. 

(The proforma figures include the pre-acquisition results of the first quarter ended 31st March 2003).

B2.	Variation of results against preceding quarter 
	
	Compared with the preceding quarter’s proforma results, the current quarter’s actual revenue increased by 30% from RM38.8 million to RM50.3 million. The increase in revenue was mainly contributed by the Oil & Gas Division which recorded an increase of 32% from RM26.2 million to RM34.7 million whereas the Transportation Engineering Division recorded an increase of 24% from RM12.6 million to RM15.6 million.

B3.	Current year prospects 

Barring any unforeseen circumstances and based on historical trend, the Board expects the group to be on track to meet its profit forecast as set out in its Prospectus dated 15th April 2003. 

B4.	Variance of actual and forecast profit 

The group has not provided any quarterly profit forecast and therefore no variance information is available for presentation. 

B5.	Taxation 

			3 months ended	    6 months ended	
	30.6.2003
RM’000	30.6.2002
RM’000	30.06.2003
RM’000	30.06.2002
RM’000	
In respect of the current period:	

		
Income Tax	1,740	-	1,740	-	

The effective tax rate for the six months under review was 30%, which was higher than the statutory income tax rate of 28% as certain expenses were not allowable for tax purposes.

B6.	Unquoted investments and/or properties 

The group has not made any investments in any unquoted investments and/or properties during the current quarter and financial year-to-date under review.

B7.	Quoted and marketable investments 

There were no investments in quoted and marketable securities made during the current quarter and financial year-to-date under review.

B8. 	Status of corporate proposal

a)	On 15th April 2003, the  Company  issued  a  prospectus  for  the  issuance of 12,329,000 new ordinary shares of RM0.50 each at an issue price of RM1.38 per ordinary shares by way of private placement and public offer payable in full on application in conjunction with its listing on the Second Board of the Kuala Lumpur Stock Exchange.

The Company was listed on the Second Board of the Kuala Lumpur Stock Exchange on 13th May 2003.

b)	On 11th July 2003, Kota Minerals & Chemicals Sdn Bhd, a wholly-owned subsidiary of the Company, entered into a conditional Share Sale Agreement (“SSA”) for the acquisition of 100,000 ordinary shares of RM1.00 each representing the entire issued and paid-up capital of OBM Terminal Sdn Bhd for a total cash consideration of RM6,300,000. 

B8. 	Status of corporate proposal 

The Proposed Acquisition, (“Proposed Acquisition”) is subject to and conditional upon approval being obtained from the Foreign Investment Committee.

              As at the date of report,
 
i)	an amount of RM630,000 being a deposit of 10% of the total purchase consideration, was paid upon on the execution of the SSA;

ii)	the balance of RM5,670,000 will be paid on the completion date which will be on or before the expiry of fourteen (14) business days from the date on which the last conditions precedent to the SSA has been complied with and/or fulfilled and/or waived.

c)	The status of Utilisation of the proceeds raised from the Public Issue pursuant to the listing of the Company in the Second Board of the Kuala Lumpur Stock Exchange (“KLSE”) amounting to RM 17,014,020 is as follows:

As approved by the Securities Commission & KLSE

RM’000
		Utilised as at the date of report

RM’000	
Working Capital	15,014
		1,966	
Estimated listing expenses	2,000		1,614

	
17,014		
3,580	

B9.	Group borrowings 

The group’s borrowings as at the end of the reporting quarter are as follows:
	RM ‘000	

Short term borrowings:
	
10,596	
Long term borrowings:
	2,651	

Total	   
13,247	

The trade finance facilities are secured by way of a debenture on the fixed and floating assets and corporate guarantees of subsidiary companies. The term loan is secured by way of a first party loan agreement and deed of assignment over the property and a guarantee by a subsidiary company. 

On 27th June 2003 and 17 th July 2003, Kota Minerals & Chemicals Sdn Bhd and Scomi Sdn Bhd have accepted the Letter of Offer for additional short term banking facilities from the following financial institutions :	

	Note	Kota Minerals & Chemicals Sdn Bhd

RM’000		Scomi Sdn Bhd

RM’000	

(i) 27 th June 2003		

     HSBC Bank Malaysia Berhad 	
(a) & (b)	
30,700		
11,000	

(ii) 17 th July 2003					
     Bumiputra Commerce Bank    
     Berhad	(a)	16,000		11,000	
					
     United Overseas Bank   
     (Malaysia) Bhd	(a)	-		8,000	

     Total		
46,700		
30,000	

B9.	Group borrowings 

The banking facilities are secured by way of:

a)	Corporate Guarantees from Scomi Group Berhad and Negative Pledges from the subsidiary companies.

b)	Blanket Counter Indemnity & Trade Finance General Agreement.

B10.	Off balance sheet financial instrument 

A forward foreign exchange contract was entered into by a subsidiary company in a currency other than its functional currency to manage exposure in the fluctuations of the foreign currency exchange rate. 

As at 28th March 2003, the notional amount of the forward foreign exchange contract was RM1.46 million. The settlement date for this forward contract is 19th September 2003.

B11.	Changes in material litigation 

Neither Scomi Group Berhad nor any of its subsidiaries is engaged in any litigation or arbitration, either as plaintiff or defendant, which has a material effect on the financial position of the company or any of its subsidiaries and the Board does not know of any proceedings pending or threatened, or of any fact likely to give rise to any proceedings, which might materially and adversely affect the position or business of company or any of its subsidiaries. 

B12.	Dividends 

The Board of Directors of the company recommends an interim dividend of 3 percent, less 28 percent income tax for the financial year-to-date under review. The entitlement to dividends will be determined on the basis of the record of depositors as at 5th September 2003 and will be paid on 3rd October 2003.

B13.	Net earnings per share 

											3 months ended
30.6.2003                                 	Year-to-date ended
30.6.2003                                 	
Basic earnings per share			
Net profit attribute to shareholders (RM’000)	4,037	3,975	
Weighted average number of shares (‘000)	94,310	47,900	
Basic earnings per share (sen)
	4.28	8.30	
Diluted earnings per share
			
Weighted average number of shares (‘000)	94,310	47,900	
Number of shares under option (‘000) *
	9,000	9,000	
No. of shares used to compute diluted 
earnings per share (‘000)
	(9,000)	(9,000)	
No. of shares that would have been issued at fair value	94,310	47,900	

Fully diluted earnings per share (sen)	4.28	
8.30	
		
* Scomi Group Berhad has established an employee share option scheme (ESOS) which shall not exceed an amount equivalent to ten percent (10%) of the issued and paid-up capital of the company at the time of offering the options. The initial grant of 9,000,000 ordinary shares of the ESOS was made on 9th May 2003.

* The adjusted weighted average of ordinary shares issued and issue able has been arrived at average for fair value at RM1.38 assuming the option were fully exercised on 13th May 2003, the date the company was listed on the Second Board of the Kuala Lumpur Stock Exchange.