Notes to the quarterly Interim Financial Report – 30th September 2003

PART A: EXPLANATORY NOTES AS PER MASB 26

A1.	Basis of preparation 

The interim financial report is unaudited and prepared in compliance 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 audited annual financial statements for the year ended 31st December 2002. 

The accounting policies and methods of computations adopted for the interim financial report are consistent with those adopted for the last annual audited financial statements except for the following adoption of MASB standards:-

1.	MASB No.25 – Income Taxes

A2.	Qualification of Annual Financial Statements

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

A3.	Seasonal and cyclical factors

The Group’s business operation results were not materially affected by any major seasonal or cyclical factors.

A4.	Unusual nature and amounts of items affecting assets, liabilities, equity, net income or cash flows

There were no unusual nature and amounts of items affecting assets, liabilities, equity, net income or cash flows during the period under review.

A5.	Material changes in estimates

There were no material changes in estimates of amount reported in the current period under review except the following:

	Pre-Acquistition		Negative Goodwill		
	Profit RM’000		RM’000		
					
As previously reported	4,579		(22,009)		
Adjustment	(570)	*	1,318	**	
					
As restated	4,009		(20,691)		

*	The pre-acquisition profit was overstated by RM0.57 million in previous announcement
** 	The effect arising from the correcting adjustments on pre-acquisition profit of RM0.57 million and on consolidated reserve of RM0.75 million.

A6.	Issuances and repayment of debt and equity securities	

There were no issuance, cancellation, repurchase, resale and repayment of debt and equity securities for the period under review.

A7.	Dividend Paid	

No dividend was declared or paid during the period under review. 

A8.	Segment information

Segmental analysis of the revenue and result :-

						   Revenue		Operating Profit
						9 months ended		9 months ended
						   30.09.2003 		  30.09.2003
	 RM’000		     RM’000
	Business Segment:		

	Process equipment				66,924			7,912	
	Terminals, refineries				14,485			1,821
	and process plant
	Plant maintenance				  1,592			  200
						_______________	_______________
							83,001			9,933
						_______________	_______________

	

A9.	Valuation of property, plant and equipment

Valuations for property, plant and equipment of the Group have been brought forward without  amendment.

A10.	Material events subsequent to the end of the interim period

There were no material events subsequent to the period under review. 

A11.	Changes in the composition of the Group

There were no material changes in the composition of the Group other than those already announced in previous quarter.

A12.	Changes in contingent liabilities

There were no material contingent liabilities for the Group as at the date of this announcement.
                                                                                                                                
A13.	Capital commitments

 	 Approved and   
 contracted for
       RM’000		Approved but not  
  contracted for
     RM’000	

Property, plant and equipment	
        222		
       4,000	

      A14.	Related party transactions

Significant related party transactions for the period under review are as follows:
						
	RM ‘000

Inter Merger Sdn Bhd, holding company
- Rental expense payable	677	
- Administrative cost payable	258

Inter Merger Trading Sdn Bhd, a related company
- Purchase of materials	698

I. M. Bina Sdn Bhd, a related company
- Contracts billings payable	3,936

KNM-DP Fabricators Sdn Bhd, an associated company  
- Contracts billings payable	3,238
- Rental income receivable	360

      A15.	Comparison with preceding year’s comparable results 

As the financial statements of the Group are drawn up for the first time this year, no preceding year’s quarter results are available for comparison purposes.

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

B1.	Review of performance 
	
The Group achieved revenue of RM 83.0 million and profit before tax of RM 28.8 million for the nine months ended 30 September 2003.

The Group achieved revenue of RM 22.5 million and profit before tax of RM 0.9 million for the current quarter ended 30 September 2003.

B2.	Variation of results against preceding quarter 

	The group’s restructuring exercise in conjunction with its listing on the Second Board of the Kuala Lumpur Stock Exchange was completed on 2 June 2003. As the interim financial report of the group for the current quarter ended 30 September 2003 are drawn up for the first time, no preceding quarter’s results are available for comparison.

B3.	Current year prospects 

Barring any unforeseen circumstances and on the assumption that the current situation remains, the Board is cautiously optimistic that the Group’s performance for the remaining months of this financial year will be reasonably good.

B4.	Variance of actual and forecast profit 

This is not applicable or required for the quarter under review under KLSE Listing Requirements Appendix 9B Part A Note 20. 

B5.	Tax expense 
 							           3 months 	           9 months
							ended 30.9.2003	ended 30.9.2003
	RM’000	RM’000	
Tax expense for the period:-			
			
Income tax	(31)	1,734	
			
	(31)	1,734	
					  				
The effective tax rate for the period under review was lower than the statutory income tax rate of 28% mainly due to the utilization of reinvestment allowance in certain subsidiaries.  

B6.	Unquoted investments and properties 

The Group has not made or disposed any investments in any unquoted investments and properties during the quarter under review.

B7.	Quoted and marketable investments 

There were no investments or disposals in quoted and marketable securities made during the quarter under review.

B8.	Status of corporate proposal announced 

There was no corporate proposal announced but not completed as at the date of this announcement. The utilization of IPO proceeds was made as follows:-

	Total Proceeds	Utilised	Unutilised	
	RM’000	RM’000	RM’000	
Repayment of term loan	11,077	10,874	203	
Capital expenditure	8,190	4,209	3,981	
Listing expenses	1,500	1,620	(120)	
Working capital	298	-	298	
				
Total	21,065	16,703	4,362	

B9.	Group borrowings 

The Group’s borrowings as at the end of the quarter under review were as follows:

	RM ‘000	
Short term borrowings:
(Secured)		
Bank Overdraft	17,842	
Bankers acceptance	32,564	
Short term portion of term loan	4,861	
Hire purchase liabilities	2,665	
	57,932	
		
Long term borrowings:
(Secured)		
Term loan 	11,819	
Hire purchases liabilities	2,330	
	14,149	
	
The above inclusive of borrowing in foreign currency of RMB 36.0 million.

The Exchange rates used  is 1 RMB = RM 0.459. 

B10.	Off balance sheet financial instrument 

There was no material financial instrument with off balance sheet risk as at the end of the period under review other than the following.

Forward foreign exchange contracts expiring within one(1) year :-

Currency	Contract Amount’000	Equivalent Amount in RM’000	
USD	649	2,468	
CAD	1,381	3,837	
EURO	99	412	
		6,717	

As forward foreign exchange contracts are entered into to hedge the Group’s purchases in foreign currencies, the contracted rates would be used to convert the foreign currency amounts into Ringgit Malaysia. This method of hedging mitigates the Group from currency risks such that the values of the underlying liabilities or assets are preserved. 

There are no significant credit and market risks posed by the above off balance sheet financial instruments.

B11.	Changes in material litigation 

As at the date of this announcement, there were no changes in material litigation since the last annual balance sheet date.

B12. 	Dividend payable

No interim or final dividend has been declared for the period ended 30 September 2003.

B13.	Earnings per share 

						                  3 months 		      9 months
								ended 30.9.2003	ended 30.9.2003
 								        RM’000		       RM’000
(a) Basic

Consolidated profit after taxation before negative goodwill 		906			2,326
Consolidated profit after taxation after negative goodwill		906			23,017
Weighted average number of ordinary shares in issue (‘000)	19,477			19,477

The calculation of basic earnings per share for the period is based on the net profit attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding during the quarter.

Weighted average number of ordinary shares				          ‘000 units
Acquisition of subsidiaries on 2 May 2003						 15,696
Effect of rights issue on 20 June 2003						   1,729
Effect of public issue on 11 August 2003						   1,237	
Effect of private placement on 11 August 2003					     815		
Weighted average number of ordinary shares					19,477
											======		

(b) Diluted
     Not applicable.

B14. Authorisation for issue

The interim financial report was authorized for issue by the Board of Directors in accordance with a Board of Directors meeting on 19 November 2003