Engineering - Our Growth - TodayIR.com
-
Upload
khangminh22 -
Category
Documents
-
view
3 -
download
0
Transcript of Engineering - Our Growth - TodayIR.com
Contents
Corporate Profile 01
Business Segments 02
Milestones 04
Growth Prospects and Expansion Plans 05
Financial Highlights 07
Chairman’s Statement 08
Group CEO’s Statement 10
Board of Directors’ Profiles 14
Executive Officers’ Profiles 16
Frequently Asked Questions 18
Financial Contents 21
PEC LTD. has built a reputation as a reliable
provider of integrated engineering solutions.
Going forward, we will build on our strong
reputation and expand our customer base,
scope of work and geographical presence.
PEC LTD.Annual Report 2009
01
Corporate profile
Founded in 1982 and led by an experienced management team, each with more than 20 years
of track record in the oil and gas and/or oil and chemical terminal industries, PEC Ltd. (“PEC” or
the “Group”) grew from a local maintenance services provider to become a plant and terminal
engineering specialist with fabrication and maintenance facilities in various countries in Asia.
Today, PEC provides engineering, procurement and/or construction/construction management
(“EPC”/“EPCm”) for project works and single-source maintenance services to the oil and gas,
petrochemical, oil and chemical terminal and pharmaceutical industries.
PEC has carved a reputation of being a reliable and trusted provider of plant and terminal engineering
services to customers that include prominent MNCs in the oil & gas, petrochemical, oil & chemical
terminal and pharmaceutical industries, some of which have been with the Group since 1982.
Currently PEC’s project works are carried out mainly in Singapore, Malaysia, Thailand, Indonesia,
Vietnam, the People’s Republic of China (“PRC”) and the Middle East while maintenance services
are carried out in Singapore and the PRC.
PEC’s innovative use of technology enables the Group to maintain a competitive edge over its
peers. Its in-house developed resource management solution and project management platform
as well as use of advanced third party softwares have helped ensure that projects are completed in
a timely manner, within budget and in accordance with quality specifications. PEC’s focus on staff
training and development equipped the Group’s workforce with the necessary skills to perform
their duties efficiently and to deliver quality works to meet customers’ project requirements.
In addition, PEC’s substantial workforce and large and growing fleet of about 2,000 pieces of
construction and maintenance equipment provides great assurance to customers that the Group
has the necessary resources on hand to perform safely, efficiently and without delay. They also
offer the Group flexibility in cross-deploying its resources, respond more readily to customer
needs and compete effectively for large scale projects.
PEC LTD.Annual Report 2009
01
PEC LTD.Annual Report 2009
02
MainTEnanCE SErviCES
Key Business segments and industries
Our unique business model enables us to achieve growth through project works in existing and new markets and our maintenance services business segment ensures that the Group has a stable recurring income stream.
° Engineering, procurement and construction management (“EPCm”) and engineering, procurement and construction (“EPC”)
° Project management consultancy services
° Construction and installation of plants/terminals
° Depending on the nature, scale and complexity of the project, it takes approximately one to two years to complete a project
° Plant maintenance works and related services works range from maintenance carried out on plant equipment to single-source maintenance services for a production plant
° Typically, we offer our maintenance services in the form of a long-term service contract, usually for a fixed term of two to five years
Other Ancillary Services include provision of information technology services and products, heat treatment services, equipment leasing and engineering consultancy services.
ProjECTS workS
Engineering, Procurement and Construction Maintenance Works
oil & Gas industry Petrochemical industry oil & Chemical Terminal industry
Pharmaceutical industry
PEC LTD.Annual Report 2009
0�
Constructing a stronger network with a
BiGGEr customer baseLeveraging on our strong position as a provider of integrated engineering solutions, we will explore new business opportunities to expand our customer base.
PEC LTD.Annual Report 2009
04
Key milestones
Over 25 years of geographical and scope expansion, marked by numerous major project wins
2006-Now
2001-2005
1996-2000
1990-1995
1980s
• Expanded into the Middle East
• Awarded major EPC contracts in the UAE and Indonesia
• Listed on the Main Board of SGX-ST
• Expanded into the PRC
• Awarded EPC contract for an oil terminal project in Jurong Island
• Incorporated to perform maintenance services
• Expanded into Indonesia & Thailand
• Awarded first single-source maintenance contract by an MNC client in Jurong Island
• Embarked on engineering & project works
• First overseas expansion into Malaysia
PEC LTD.Annual Report 2009
04
PEC LTD.Annual Report 2009
05
GrowTH ProSPECTSGrowth trends and developments in the industries that will open up opportunities for PEC:
oil and gas and petrochemical industries• Singapore is host to one of the largest oil and gas and
petrochemical complexes in Southeast Asia which continues to attract new investments as well as further integration and upgrading of existing facilities
• Middle Eastern countries are moving forward with investments in projects for higher valued derivative products
oil and chemical terminal industry• Continuing demand for terminal facilities in Asia and the
Middle East driven by the sustained growth in demand for oil, chemical and new clean fuel products
Pharmaceutical industry• Singapore’s growing pharmaceutical industry is
expected to develop further through expansion of existing plants and establishment of new plants
EXPanSion PLanSPEC intends to focus on the following three-pronged strategy towards our future growth and expansion:
Expand our customer base• Enhance our sales and marketing network to explore new
business opportunities to increase our customer base
Broaden our scope of work• Broaden scope of work to include other related
engineering disciplines and offer a more comprehensive/integrated solution
Geographical expansion• Explore new businesses in countries we currently do not
have a presence• Set up fabrication facilities nearer to our customers so as
to be able to respond to their needs more effectively and to enhance cost-effectiveness
in line with our three-pronged strategy, we intend to:• Construct a new fabrication facility in the Middle East• Further expand our on-site capabilities through the
acquisition of new equipment and machineries• Grow via strategic alliances and/or joint-ventures,
acquisitions of, and investments in related businesses• Enhance our EPC and EPCm services via technological
upgrading and investments
growtH prospeCts and eXpansion plans
Thailand
Malaysia
Singapore
PRC
Vietnam
PEC Fabrication & Maintenance Facilities/Support
PEC Projects
STrEnGTHEn our geographical presence
We intend to expand our presence in both new and existing markets. In addition, locating our fabrication facilities closer to our customers overseas also enables us to reduce our costs and at the same time respond to their needs more effectively.
Indonesia
Qatar
UAE
Saudi Arabia
PEC LTD.Annual Report 2009
07
finanCial HigHligHts
kEY FinanCiaL raTioS FY2007 FY2008 FY2009Earnings per Share(1) (cents) 14.5 14.3 12.0Net Assets Value per Share(2) (cents) 40.6 54.4 60.0Gearing 0.5% 2.1% 0.1%
BaLanCE SHEET (S$ million) FY2007 FY2008 FY2009Non-current assets 34.7 45.2 58.9Current assets 92.9 143.6 155.2Current liabilities 51.9 86.5 94.5Non-current liabilities 2.1 2.8 3.4Shareholders’ equity 71.1 95.2 105.0Minority Interest 2.6 4.3 11.3
CaSHFLow STaTEMEnT (S$ million) FY2007 FY2008 FY2009Net cash generated from operating activities 28.9 26.9 27.3Net cash used in investing activities (14.1) (15.4) (21.1)Net cash generated from (used in) financing activities (1.2) 1.6 (3.8)Cash & cash equivalents at the beginning of the financial year 21.3 34.9 47.9Cash & cash equivalents at the end of the financial year 34.9 47.9 50.4
Notes:(1) EPS computed using the profit attributable to Shareholders of the Company divided by pre-Invitation share capital of 175,000,000 Shares(2) The NAV per Share computed by dividing NAV (which is net assets contributable to shareholders of our Company) by pre-Invitation share capital of
175,000,000 Shares.
07
PEC LTD.Annual Report 2009
Net Profit After Tax
Net Profit Attributable to Shareholders
30
25
20
15
10
5
0FY2007 FY2008 FY2009
26.2 25.427.0
25.124.5
21.0
S$ million
net Profit after Tax & net Profit attributable
to Shareholders
500
450
400
350
300
250
200
150
100
50
0
S$ million
FY2007 FY2008 FY2009
143.8
92.3
200.0
113.9
332.8
106.8
0.9
0.7
0.5
CAGR=36.5%
revenue
Project Works
Plant Maintenance and Other Related Services
Other Operations
PEC LTD.Annual Report 2009
08
eXeCutive CHairman’s statement
rECorD rEvEnuE DESPiTE CHaLLEnGinG EnvironMEnT
For the year ended 30 June 2009 (“FY2009”), PEC recorded an all time high revenue of S$440.5 million despite the challenging operating environment. I believe that our performance attests to our ability to build on our strengths such as our established track record, experienced management team and large pool of available manpower and equipment resources to capture opportunities and grow our business.
While our topline grew in FY2009, our bottomline was affected by lower contribution from higher margin project works plus higher expenses that arose from delay of a project.
We believe that there are ample opportunities for new project wins in FY2010 as we have observed a pick-up in interest
EDna koExecutive Chairman
it gives me great pleasure to present PEC’s first annual report following our listing on the main Board of the singapore stock exchange on 7 august 2009. our listing was a momentous occasion for peC, and i warmly welcome our new shareholders to peC.
Dear Shareholders,
PEC LTD.Annual Report 2009
09
within the industry to move ahead with investment decisions. Although the operating environment for FY2010 will continue to be challenging, we are encouraged by the enquiries we have been receiving and will continue to actively explore and pursue these opportunities with current and potential customers. We will concentrate our efforts particularly on project and maintenance works with high technical content and integration of multiple engineering disciplines that could potentially yield higher margins.
Meanwhile our on-going long term maintenance contracts with a number of key customers in the oil and gas, petrochemical and pharmaceutical industries will continue to provide PEC with stable, recurring contributions to our revenue and income.
CaPTurinG oPPorTuniTiES For GrowTH
Although we remain cautious of our near-term outlook, we are confident of the long-term fundamentals of the industries in which we operate. We believe that sustained demand for products like oil and chemical as well as clean fuels products bode well for us. Furthermore, investments in oil and gas projects in the countries in which we operate have largely continued and remain active. We believe that there are opportunities for new projects, and we will continue to explore and pursue these opportunities with our customers.
We have clear expansion strategies in place to enable us to take advantage of the growth opportunities in the industries we are in. We will focus on expanding our customer base, widening our scope of work and broadening our geographical reach to achieve greater growth. Our listing has given us an excellent platform to
execute our expansion strategies – further enhancing our strong credentials, facilitating our overseas expansion and strengthening our capabilities.
We believe that PEC is well-positioned and well-equipped to capture the opportunities in the oil and gas, petrochemical, oil and chemical terminal and pharmaceutical industries to deliver value to our shareholders.
HEarTFELT aPPrECiaTion To aLL
PEC’s listing on the Main Board of the Singapore Stock Exchange is a major milestone for us and it signifies the next chapter in our corporate journey.
On behalf of the Board of Directors, I would like to express my sincere thanks to PEC’s committed management team and staff, business partners, customers, bankers, suppliers and everyone who played a part in our growth and success over the past 27 years. PEC’s success is a reflection of everyone’s support and dedication.
I would also like to thank all our shareholders for your confidence in PEC and we look forward to delivering greater growth as we execute our expansion plans.
EDna koExecutive Chairman
09
PEC LTD.Annual Report 2009
PEC LTD.Annual Report 2009
10
I am pleased to present a review of PEC’s financial
performance in our first year as a listed company. For the
full year ended 30 June 2009 (“FY2009”), we achieved
record revenue, maintained healthy profitability and a strong
balance sheet despite the challenging global business
environment.
rEviEw oF FinanCiaL PErForManCE
In FY2009, PEC posted a 40% year-on-year increase
in revenue from S$314.6 million in FY2008 to achieve a
record revenue of S$440.5 million. The increase in revenue
was mainly attributed to increased revenue contributions
of S$132.8 million from project works in the Middle East
and Singapore as the Group continued to leverage on its
strengths and track record to secure new projects from
existing and new customers. The revenue growth in FY2009
was partially offset by a decrease in revenue contributions
from lower maintenance activities. In terms of our profitability,
our gross profit increased by 13% to S$91.4 million in line
with the increase in revenue. Our overall gross profit margin
was maintained at above 20%. Net profit dipped by 9% to
S$24.5 million compared to S$27.0 million in FY2008 while
profit attributable to shareholders decreased by 16% to
S$21.0 million. Our earnings per share was 12.0 Singapore
cents for FY2009.
group Ceo’s statement
Dear Shareholders,
roBErT DoMPELinGGroup Chief Executive Officer
PEC LTD.Annual Report 2009
11
Our FY2009 bottomline was impacted by lower
contributions from higher margin projects works and higher
expenses due to the delay of a project work. The Group
took a prudent accounting stand for the higher expenses
by providing for the full possible impact although the
financial settlement to PEC remains to be concluded.
SEGMEnTaL PErForManCE
PEC’s project works and maintenance services segments
recorded revenues of S$332.8 million and S$106.8 million
respectively. Project works are recognised on a percentage
of completion basis and accounted for approximately
76% of total revenue. Depending on the nature, scale and
complexity of the works, we usually take approximately
one to two years to complete a project. Maintenance
services are usually offered in the form of a long-term service
contract and accounted for about 24% of total revenue.
Our maintenance service contract is usually for a fixed
term of two to five years, in which our various maintenance
services and their relevant rates would be itemised and
our customers will be billed for each individual work order
completed.
For PEC’s geographical business segments, Singapore
continued to be our major market contributing about 64%
or S$283.9 milli million in FY2009, or up from 16% of total
revenue in FY2008 to 27% of total revenue in FY2009. The
rest of our markets posted a combined revenue of S$38.2
million.
roBuST CaSH PoSiTion
Our balance sheet as at 30 June 2009 was solid. Our
cash position was robust, with S$52.4 million of cash and
cash equivalents as at 30 June 2009 before adjusting for
the FY2009 interim dividend declared on 25 June 2009 of
S$8.0 million. In addition, subsequent to the financial year
end on 30 June 2009, we raised estimated net proceeds
of S$26.2 million (inclusive of over-allotment) from our initial
public offering in August 2009.
The Group also continued to maintain low debt levels with
negligible gearing. Group net asset value per share as at
30 June 2009 was 60.0 Singapore cents, up from 54.4
Singapore cents as at 30 June 2008.
for the full year ended 30 June 2009, we achieved record revenue, maintained healthy profitability and a strong balance sheet.
11
PEC LTD.Annual Report 2009
PEC LTD.Annual Report 2009
12
group Ceo’s statement (cont’d)
BuSinESS ouTLook
PEC has turned in another year of healthy profitability in FY2009 despite the challenging
economic and operating environment we faced during our financial year. In FY2010, we
will remain focused on developing our partnerships with current and potential customers.
We have been receiving numerous enquiries and we will concentrate on translating those
business opportunities into results. As at 31 August 2009, we already have an order book
for ongoing project works of approximately S$150.0 million, of which a substantial portion
is expected to be completed and recognised as revenue in FY2010. In addition, we have
our existing long-term maintenance contracts with a number of key customers in the
oil, petrochemical and pharmaceutical industries that will continue to provide the Group
with a steady and positive contribution to our revenue and income. We envisage that the
operating environment for FY2010 will continue to be challenging and price competition
will remain keen. Nonetheless, barring unforeseen circumstances, we expect to remain
profitable in FY2010.
roBErT DoMPELinGGroup Chief Executive Officer
in fy2010, we will remain focused on developing our partnerships with current and potential customers. We have been receiving numerous enquiries and we will concentrate on translating those business opportunities into results.
BroaDEn our scope of workWe aim to offer our customers a more comprehensive and integrated solution by expanding our scope of work to include other related engineering disciplines.
PEC LTD.Annual Report 2009
14
Board of direCtors’ profiles
From Left to Right (Front Row)Robert Dompeling, Edna Ko Poh Thim
From Left to Right (Back Row)Wong Peng, Dr Foo Fatt Kah, Ho Yew Mun, Chia Kim Huat
PEC LTD.Annual Report 2009
15
Edna ko Poh ThimExecutive Chairman
Ms Edna Ko Poh Thim is our Executive Chairman and has been with our Group for more than 20 years. She is responsible for the overall business strategy and development of our Group. She first joined our Company in February 1984 as an executive director. From August 1991 to June 2007, she was the managing director of our Company. She was responsible for the successful expansion of our Company in the local and overseas markets through the formation of strategic joint-ventures. She was appointed as our Executive Chairman in July 2007.
Ms Ko has been a member of The Rotary Club of Jurong Town since 1999 and a patron of Siglap South Community Centre Management Committee since 2002. Ms Ko graduated from the University of Hawaii, the United States of America, with a Bachelor’s degree in Business Administration in 1982.
robert DompelingChief Executive Officer
Mr Robert Dompeling is our Group Chief Executive Officer. He has held this position since he joined our Company in July 2007, when he was also appointed to our Board of Directors. He is responsible for the operational, commercial and financial management of our Group as well as charting the business development and expansion of our Group. He started his career with the Royal Dutch Shell Group in the Netherlands in July 1984 as a petroleum engineer. During his employment with the Royal Dutch Shell Group, he held various positions in the United Kingdom and Oman. From 1988 to 2007, he worked for the Royal Vopak group of companies, holding various management positions within the group where he oversaw the growth and development of the group’s Singapore business.
Mr Dompeling graduated with both Bachelor’s and Master’s degrees in Naval Architecture from the University of Technology of Delft, the Netherlands, in 1983 and 1984 respectively.
wong PengManaging Director
Mr Wong Peng is our Managing Director and has been with our Group for more than 25 years. He is responsible for the day-to-day operations of our Group and works closely with our Executive Chairman and Group Chief Executive Officer in formulating our Group’s strategies and policies. He started his career as a mechanical engineer with Tian San Singapore in 1978 before joining the company in 1982 as the material and equipment controller. In December 1988, he was appointed as an executive director and general manager of our Company and was subsequently appointed as our Managing Director in July 2007.
Mr Wong graduated from the University of Singapore with a Bachelor’s degree in Mechanical Engineering in 1978 and has been a member of The Institution of Engineers, Singapore since June 1991.
15
PEC LTD.Annual Report 2009
Dr Foo Fatt kahLead Independent Director
Dr Foo Fatt Kah is our Lead Independent Director and was appointed to our Board of Directors on 25 June 2009. Dr Foo is the founder and chief executive officer of Maida Vale Associates Pte Ltd and also the Asian venture partner for Aravis Ventures. He had a 16-year career in investment banking spanning Europe and Asia and was a rated analyst in the Institutional Investor and Extel European polls. Between 1987 and 1994, he worked in London as an equity analyst with Robert Fleming & Co, Barings Securities and Paribas Capital Markets. In 1994, he returned to Asia and worked in Deutsche Morgan Grenfell (now Deutsche Securities) and Societe General (SG). From 1996 to 2003, he worked for SG Securities Asia, initially as the Group Head of Equity Research and subsequently as Head of Asian Equities and Co-Head of the Asian Investment Bank, covering 10 countries.
Dr Foo was an executive director with SGX-ST Catalist listed Cyber Village Holdings Limited. Dr Foo is qualified in Medicine (M.B., B.Ch., B.A.O.) and Business Administration (MBA) from Queen’s University, United Kingdom.
Ho Yew MunIndependent Director
Mr Ho Yew Mun is our Independent Director and was appointed to our Board of Directors on 25 June 2009. He is currently an executive director of Ho Yew Mun Pte Ltd. Between February 2001 and April 2005, he was the managing director of Investment Banking Group, Equity Capital Markets, DBS Bank Ltd. During this period, he was also the Head of Equity Capital Markets (Hong Kong) from November 2001 to November 2003. Mr Ho was Senior Vice-President and Head of Securities Market Division and was also the Listing Manager in the then Stock Exchange of Singapore during the period from June 1993 to December 2000. From August 1988 to March 1993, he was a financial management consultant with The Treasury (New Zealand) and also the financial controller, Government Computing Service (New Zealand).
Mr Ho is a Fellow of the Association of Chartered Certified Accountants and a Fellow of the Institute of Certified Public Accountants, Singapore. He graduated from Victoria University, Wellington, with a Master’s degree in Business Administration. He is also currently an independent director of China Fibretech Ltd and CDW Holding Limited which are listed on SGX-ST.
Chia kim HuatIndependent Director
Mr Chia Kim Huat is our Independent Director and was appointed to our Board of Directors on 25 June 2009. He is presently a partner of Rajah & Tann LLP and heads its China Practice Group. Mr Chia has more than 15 years of experience as a practising lawyer specialising in capital market transactions, cross-border joint-ventures, private equity investments, mergers and acquisitions, corporate and banking transactions.
Mr Chia is a director of Ascendas Funds Management. He graduated from the National University of Singapore with a Bachelor of Laws (Honours) degree in 1992 and has been a member of both the Singapore Academy of Law as well as The Law Society of Singapore.
PEC LTD.Annual Report 2009
1616
eXeCutive offiCers’ profiles
CHEE kok SHinESenior Director Tender and Proposal
Mr Chee Kok Shine is our Senior Director Tender and Proposal, a position he has held since January 2006. He is responsible for the overall coordination of our Company’s projects tendering preparation and costings and he sits on our Group’s tender committee. Mr Chee has more than 20 years of experience in project management. He started his career in November 1979 as a costing engineer with Tian San Singapore, and was later promoted to a project coordinator in February 1983. He joined our Company in March 1985 and has held various appointments such as site manager and project manager. Mr Chee graduated with a Bachelor’s degree in Mechanical Engineering from the University of Singapore in 1979. He has been a member of the Institution of Engineers, Singapore since 1989.
Fan MinG kEonGSenior Director Projects
Mr Fan Ming Keong joined our Group in July 2007 as Senior Director Projects and is responsible for leading and overseeing the execution of our Company’s EPC and EPCm projects. He started his career in March 1981 as a designer for piping systems in various companies, namely Chiyoda Malaysia Sdn Bhd, Protek Consultant Engineers Sdn Bhd and Sime Engineering Sdn Bhd. From February 1989 till September 2005, he started taking on project engineering and coordination positions in companies, namely Edeleanu Asia Pte Ltd, Jacobs Engineering Singapore Pte Ltd and Stork Comprimo Singapore Pte Ltd, where he was in charge of project execution and coordination. Subsequently, he joined our Group in November 2005 as an executive director and general manager to one of our subsidiaries. Mr Fan graduated from Bedford Technical College, Malaysia in 1986 with a diploma in Mechanical Engineering. He also attended the Construction Safety Course for project managers conducted by Ministry of Manpower, Singapore, in 2002 and the Project Management Course by Jacobs College, United States of America, in 2001.
From Left to Right (Front Row)Toh Boon Chuan, Chee Kok Shine, Goh Eng Mui
From Left to Right (Back Row)Choo Eng Kuan, Fan Ming Keong, John Lim Yeu Siang, Gan Tong Nong
PEC LTD.Annual Report 2009
17
joHn LiM YEu SianGSenior Director Business Development and Corporate Services
Mr John Lim Yeu Siang is our Senior Director Business Development and Corporate Services and heads the business development team to explore and develop new business opportunities. He is also responsible for staff recruitment, training and development. Mr Lim started his career as an engineer with Esso Singapore Pte Ltd in March 1981. From 1983 to December 1990, he worked for Exxon Chemical Singapore Pte Ltd as a manufacturing unit supervisor. In January 1991, Mr Lim joined Glaxo Pharmaceutical Singapore Pte Ltd as a manufacturing section manager. He joined Exxon Chemicals Paramins Singapore Pte Ltd in May 1991 as its operations manager before assuming the position of manufacturing manager. From January 1999 to June 2006, he was with Infineum Singapore Pte Ltd. holding various positions in regional supply, marketing, strategic planning and general management. Finally, before joining the Company in January 2008, Mr Lim was the general manager of Chemical Specialities Singapore Pte Ltd. Mr Lim graduated from the University of Manchester Institute of Science & Technology in the United Kingdom with a Bachelor’s degree in Chemical Engineering.
GoH EnG MuiDirector Finance
Ms Goh Eng Mui is our Director Finance, a position she was appointed to in January 2008. She has more than 20 years of experience in the accounting field. She is responsible for the accounting, financial, treasury and taxation functions of our Group. Prior to joining our Company as an accounts executive in 1990, Ms Goh had held several accounting positions in various companies, namely Tanglin Trust Limited, Singapore Shinei Sangyo Pte Ltd, Fujikura International Management (S) Pte Ltd and Nycosa (S) Pte Ltd from May 1983 to March 1990. Ms Goh graduated from the National University of Ireland with a Master of Science (Finance) in 2000.
Gan TonG nonGDirector Maintenance
Mr Gan Tong Nong was appointed as our Director Maintenance in January 2006. He is responsible for coordinating the maintenance service activities of our Company, which includes managing cost and productivity efficiency. He started his career with Tian San Singapore in October 1966 and progressed to become a site manager, where he participated in various overseas projects. Subsequently, he joined our Company in May 1985 as a site manager and was responsible for overseeing tankage, piping and equipment maintenance and other related services.
ToH Boon CHuanDirector Construction
Mr Toh Boon Chuan has been our Director Construction since January 2006 and is responsible for managing the execution of construction activities for project works. He started his career with Tian San Malaysia in October 1984 as a welding inspector and later joined our Company in November 1988 as a construction superintendent, responsible for organising the manpower, tools and equipment required for the execution of projects. He has been involved in the execution of our Company’s construction projects and has accumulated over 20 years of experience in our industry. He graduated from Sekolah Tinggi Port Dickson, Malaysia in 1982.
CHoo EnG kuanDirector Quality Assurance / Quality Control
Mr Choo Eng Kuan joined our Group in 1996 and has been our Director Quality Assurance/ Quality Control since January 2008. He is responsible for overseeing the quality aspects of projects and is in charge of developing, maintaining and implementing our OSHEQ programme. He started his career in April 1976 with Vetco Singapore Pte. Ltd., a company specialising in the provision of inspection and testing services for the oil industry, and was responsible for the inspection of oil related equipment. From January 1979 to January 1983, he was with Oilfield Tubular Services as a senior quality control inspector. He was with Moody International QA Services Pte. Ltd. from January 1983 and was responsible for ensuring quality assurance of its projects. Mr Choo has obtained professional qualifications such as the Certificate of Proficiency issued by Certification Scheme for Welding Inspection Personnel (CSWIP), United Kingdom in 1981 and attained the ASNT Central Certification Program (ACCP) Level II in 2003. He is a member of the Singapore Welding Society and is also a registered certificated QMS Lead Auditor with the International Register of Certificated Auditors (IRCA), United Kingdom.
17
PEC LTD.Annual Report 2009
PEC LTD.Annual Report 2009
18
frequently asKed questions
1. what is PEC’s business model?
° We have a balanced portfolio of project works which offer growth potential in existing and new markets, as well as maintenance services with recurring income
° Our project works and maintenance services offer us synergistic positioning for scope expansion with existing customers • Maintenance services allow us to develop close contact with our customers, hence positioning us well for opportunities for project works with the customer • Project works enable us to have a better understanding of our customer’s facilities and requirements which may lead to maintenance services contracts upon project completion° Combination of engineering and construction resources provide us with a competitive advantage
2. what are your competitive strengths?
° Ability to provide EPC project works and single-source maintenance services° Established track record and experienced management team° Structured staff training and development° Large and growing fleet of construction equipment as well as substantial workforce which can be easily mobilised to
enable PEC to compete effectively for large scale projects° Innovative use of information communication technology
�. what part of the plant and terminal construction and maintenance value chain is PEC in?
° PEC is able to offer services at every stage of the project works process ° PEC also provides maintenance services to existing plants and terminals
FeasibilityStudies
Planning / Design
Engineering CommissioningProcurement Construction MaintenanceServices
Projects worksMaintenance
Services
4. How long do PEC’s customers usually engage your services for?
° For project works, an EPC project typically takes one to two years to complete° Maintenance services are usually for a fixed term of two to five years
PEC LTD.Annual Report 2009
19
5. who are PEC’s customers?
° PEC’s customers include prominent MNCs in the oil & gas, petrochemical, oil & chemical terminal and pharmaceutical industries
° Our reliability and commitment to health, safety and environment, and quality management are some of our key success factors and reasons why we have customers that have continued working with us since 1982
° Our customers’ demands for our services outside Singapore have helped fuel our overseas expansion, and we will continue to leverage on our customers’ worldwide presence in our geographical expansion
6. How different is PEC from your peers?
° PEC has a unique business model with strengths in engineering, construction and maintenance, whereby we are able to execute both specialised engineering project works and maintenance services
° We have built up a strong track record and reputation over the years for being a reliable and trusted provider of plant and terminal engineering services
° Large fleet of equipment and our own construction crew allow us flexibility to deploy them around the world and reduce our reliance on local third party providers as well as to compete effectively for large scale projects
° In this industry where highly skilled personnel with relevant experience are critical, we have continually emphasised the growth and development of our human resources:
• Focus on developing talents and staff training • Our Management team is supported by a strong team of Executive Officers, many of whom have been with the company for more than 15 years
7. How is PEC managed?
° Our Board of Directors is entrusted with the responsibility for our overall management and direction • Independent Directors form half of our Board, which consists of 6 Directors • We have 3 Board committees (the Audit Committee, the Nominating Committee and the Remuneration Committee) to represent and provide assistance to the Board of Directors of the Company in fulfilling its legal and fiduciary obligations° Our Executive Directors and Executive Officers are responsible for our day-to-day management and operations, and they
report to our Board of Directors
8. what is PEC’s dividend policy?
We do not have a fixed dividend policy at the moment. Going forward, our Board of Directors will make decisions on dividend payout based on:° The level of our cash, gearing, return on equity and retained earnings° Our expected financial performance° Our projected levels of capital expenditure and other investment plans° The dividend yield of similar companies and comparable companies globally° Restrictions on payment of dividend that may be imposed on us by our financing arrangements
EnHanCinG our engineering and on-site capabilitiesEnhancement of our EPC and EPCm services, equipment and machineries through acquisitions and technological upgrading will enable us to meet our customers’ needs even better.
Corporate Governance 22
Report of the Directors 36
Statement by Directors 39
Independent Auditors’ Report 40
Consolidated Income Statement 42
Balance Sheets 43
Statement of Changes in Equity 45
Consolidated Cash Flow Statements 48
Notes to the Financial Statements 50
Statistics of Shareholdings 103
Notice of Annual General Meeting 105
Proxy Form
Corporate Information
Annual Report 2009
FINANCIAL CONTENTS
PEC LTD.Annual Report 2009
22
CORPORATE GOVERNANCE
PEC Ltd. (the “Company”) is committed to ensuring and maintaining a high standard of corporate governance within the Company and its subsidiaries (the “Group”). Good corporate governance establishes and maintains a legal and ethical environment, which helps to preserve and enhance the interests of all shareholders.
This report describes the corporate governance framework and practices of the Company with specifi c reference to the principles of the Singapore Code of Corporate Governance introduced in April 2001 and amended in 2005 (the “Code”).
This Report should be read as a whole, instead of being read separately under the different principles of the 2005 Code.
(A) BOARD MATTERS
Board’s Conduct of its Affairs
Principle 1 : Every company should be headed by an effective Board to lead and control the company. The Board is collectively responsible for the success of the company. The Board works with Management to achieve this and the Management remains accountable to the Board.
Role of the Board of Directors (the “Board”)
The Board assumes responsibility for stewardship of the Group and is primarily responsible for the protection and enhancement of long-term value and returns for the shareholders. It supervises the management of the business and affairs of the Group, provides corporate direction, monitors managerial performance and reviews fi nancial results of the Group. In addition, the Board is directly responsible for decision making in respect of the following matters:
a. approve the business strategies including signifi cant acquisition and disposal of subsidiaries or assets and liabilities;
b. approve the annual budgets, major funding proposals, signifi cant capital expenditures and investment and divestment proposals;
c. approve the release of the Group’s quarterly and full year’s fi nancial results and interested person transactions;
d. oversee the processes for risk management, fi nancial reporting and compliance and evaluate the adequacy of internal controls, as may be recommended by the Audit Committee;
e. review the performance of Management, approve the nomination to the Board of Directors and appointment of key executives, as may be recommended by the Nominating Committee;
f. review and endorse the framework of remuneration for the Board and key executives, as may be recommended by the Remuneration Committee; and
g. review and endorse corporate policies in keeping with good corporate governance and business practice.
PEC LTD.Annual Report 2009
23
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
CORPORATE GOVERNANCE
The Board will endeavour to provide shareholders with a balanced and understandable assessment of the Group’s performance, position and prospects on a quarterly basis.
To assist in the execution of its responsibilities, the Board has established a number of Board committees which include an Audit Committee (“AC”), a Nominating Committee (“NC”) and a Remuneration Committee (“RC”), each of which functions within clearly defi ned terms of reference and operating procedures which are reviewed on a regular basis.
Board Meetings and Meetings of Board Committees
The Board will meet on a quarterly basis and whenever necessary for the discharge of their duties. Dates of the Board meetings are normally set by the directors well in advance. Meetings of the Board and Board Committees may be conducted by way of telephone and video conferencing if necessary.
The number of meetings held by the Board and Board committees and attendance thereat after the Company’s admission to the Offi cial List of the Singapore Exchange Securities Trading Limited (the “SGX-ST”) on 7 August 2009 are as follows:
DirectorsBoard AC NC RC
Number Attended Number Attended Number Attended Number Attended
Edna Ko Poh Thim 1 1 NA NA NA NA NA NA
Robert Dompeling 1 1 NA NA NA NA NA NA
Wong Peng 1 1 NA NA NA NA NA NA
Dr Foo Fatt Kah 1 1 1 1 1 1 1 1
Chia Kim Huat 1 1 1 1 1 1 1 1
Ho Yew Mun 1 1 1 1 1 1 1 1
Training
The Board will constantly examine its size and, with a view to determining the impact of its number upon effectiveness, decide on what it considers an appropriate size for itself. The composition of the Board will be reviewed on an annual basis by the NC to ensure that the Board has the appropriate mix of expertise and experience.
All directors have many years of corporate experience and are familiar with their duties and responsibilities as directors. Upon appointment, each director will receive a letter of appointment from the Executive Chairman explaining his duties and obligations as a member of the Board. In addition, newly appointed directors will be given briefi ngs by the Executive Chairman and/or the Group Chief Executive Offi cer and/or top management of the Company on the business activities of the Group and its strategic directions, as well as their duties and responsibilities as directors. The directors are also briefed by professionals either during Board meetings or at separate meetings on regulatory changes which have an important bearing on the Company and the directors’ obligations to the Company.
PEC LTD.Annual Report 2009
24
CORPORATE GOVERNANCE
The Company welcomes directors to seek explanations or clarifi cations from and/or convene informal discussions with the Management on any aspect of the Group’s operations or business. Necessary arrangements will be made for the informal discussions or explanations as and when required.
Board Composition and Balance
Principle 2 : There should be a strong and independent element on the Board, which is able to exercise objective judgement on corporate affairs independently, in particular, from Management. No individual or small group of individuals should be allowed to dominate the Board’s decision making.
The Board consists of six (6) directors of whom three (3) are non-executive and independent. The list of directors is as follows:
Executive Directors
Edna Ko Poh Thim (Executive Chairman) Robert Dompeling (Group Chief Executive Offi cer) Wong Peng (Managing Director)
Non-Executive Directors
Dr Foo Fatt Kah (Lead Independent Director) Chia Kim Huat (Independent Director) Ho Yew Mun (Independent Director)
The size and composition of the Board will be reviewed from time to time by the NC to ensure that the size of the Board is conducive to effective discussions and decision making and that the current Board size of six (6) directors of which three (3) are independent directors, is appropriate and effective, taking into account the nature and scope of the Company’s operations.
The current Board comprises persons with diverse expertise and experience in accounting, business, legal and management, fi nance and risk management who as a group provide core competencies necessary to meet the Company’s requirements. The directors’ objective judgement on corporate affairs and collective experience and knowledge are invaluable to the Group and allows for the useful exchange of ideas and views.
Independence of directors
The NC reviews the independence of each director on an annual basis based on the Code’s defi nition of what constitutes an independent director. The NC is of the view that the three (3) independent directors (who represent more than one-third of the Board) are independent and that there is a strong and independent element on the Board which is able to exercise objective judgement on corporate matters independently, in particular, from the Management, and that no individual or small group of individuals dominate the Board’s decision-making process.
PEC LTD.Annual Report 2009
25
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
CORPORATE GOVERNANCE
Chairman and Chief Executive Offi cer
Principle 3 : There should be a clear division of responsibilities at the top of the company – the working of the Board and the executive responsibility of the company’s business – which will ensure a balance of power and authority, such that no one individual represents a considerable concentration of power.
Different individuals assume the roles of the Chairman of the Board and the Chief Executive Offi cer (’CEO’). The Chairman of the Board is Ms Edna Ko Poh Thim who is the spouse of Mr Robert Dompeling, the Group CEO of the Company. As the Executive Chairman, Ms Ko is responsible for, among others, the overall business strategy and development of the Group, the exercise of control over quantity, quality and timeliness of the fl ow of information between the Management of the Company and the Board. She also schedules Board meetings, oversees the preparation of the agenda for Board meetings and assists in ensuring compliance with the Group’s guidelines on corporate governance.
Ms Ko is assisted by the Group CEO, Mr Robert Dompeling who together with the Management comprising each subsidiary’s general managers and key senior managers, are responsible for the operational, commercial and fi nancial management of the Group as well as charting the business development and expansion of the Group.
All major decisions made by the Executive Chairman and Group CEO are reviewed by the AC. Their performance and appointment to the Board are reviewed periodically by the NC and their remuneration packages are reviewed periodically by the RC. As such, the Board believes that there are adequate safeguards in place to ensure a balance of power and authority such that no one individual represents a considerable concentration of power. The separation of the roles of the Executive Chairman and Group CEO ensures a balance of power and authority such that no one individual represents a considerable concentration of power.
Board Membership
Principle 4 : There should be a formal and transparent process for the appointment of new directors to the Board.
The NC comprises of entirely non-executive independent directors:
Chia Kim Huat (Chairman) Dr Foo Fatt Kah Ho Yew Mun
PEC LTD.Annual Report 2009
26
CORPORATE GOVERNANCE
The primary functions of the NC are as follows:
• to identify candidates and review all nominations for the appointment or re-appointment of members of the Board, the CEO, and to determine the selection criteria therefor;
• to ensure that all Board appointees undergo an appropriate induction programme;
• to regularly review the Board’s structure, size and composition and make recommendations to the Board with regard to any adjustments that are deemed necessary;
• to identify gaps in the mix of skills, experience and other qualities required in an effective Board and to nominate or recommend suitable candidates to fi ll these gaps;
• to decide whether a director is able to and has been adequately carrying out his duties as director of the Company, particularly where the director has multiple board representations;
• to review the independence of each director annually;
• to decide how the Board's performance may be evaluated and propose objective performance criteria for the Board's approval; and
• to evaluate the effectiveness of the Board as a whole and the contribution by each individual director to the effectiveness of the Board.
The NC held one (1) meeting after the Company’s admission to the Offi cial List of the SGX-ST.
The directors will submit themselves for re-nomination and re-election at regular intervals of at least once every three (3) years. Under the Company’s existing Articles of Association, each director shall retire from offi ce at least once every three years. In reviewing and recommending to the Board the re-nomination and re-election of existing directors, the NC takes into consideration the directors’ contribution and performance at Board meetings, including attendance, preparedness, participation and candour.
Each member of the NC will abstain from making any recommendations and/or participating in any deliberation of the NC and from voting on any resolution, in respect of the assessment of his own performance or re-nomination as a director.
The NC is satisfi ed that suffi cient time and attention are being given by the directors to the affairs of the Company and the Group, notwithstanding that some of the directors have multiple board representations.
In its search and nomination process for new directors, the NC has, at its disposal, search companies, personal contacts and recommendations, to cast its net as wide as possible for the right candidates.
Key information regarding the directors is set out on pages 14 and 15.
PEC LTD.Annual Report 2009
27
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
CORPORATE GOVERNANCE
Board Performance
Principle 5 : There should be a formal assessment of the effectiveness of the Board as a whole and the contribution by each director to the effectiveness of the Board.
As the Company has been admitted to the Offi cial List of the SGX-ST recently, the NC is currently considering how the Board’s performance should be evaluated and the performance criteria to be adopted and will be initiating a Board performance evaluation process during the fi nancial year ending 30 June 2010.
Access to Infomation
Principle 6 : In order to fulfi l their responsibilities, Board members should be provided with complete, adequate and timely information prior to board meetings and on an on-going basis.
To assist the Board in fulfi lling its responsibilities, the Management provides the Board with a management report containing complete, adequate and timely information prior to the Board meetings. All directors have separate and independent access to the Management, including the Company Secretary at all times. The Company Secretary or his representative attends all Board meetings and ensures that Board procedures and all other rules and regulations applicable to the Company are complied with.
Changes to regulations are closely monitored by the Management and for changes which have an important bearing on the Company or the directors’ disclosure obligations, the directors are briefed during Board meetings.
The directors and the chairmen of the respective committees, whether as a group or individually are able to seek independent professional advice as and when necessary in furtherance of their duties at the Company’s expense. The appointment of such professional advisor is subject to approval by the Board.
(B) REMUNERATION MATTERS
Procedures for Developing Remuneration Policies
Principle 7 : There should be a formal and transparent procedure for developing policy on executive remuneration and for fi xing the remuneration packages of individual directors. No director should be involved in deciding his own remuneration.
The RC comprises of entirely non-executive and independent directors:
Dr Foo Fatt Kah (Chairman) Chia Kim Huat Ho Yew Mun
The members of the RC have many years of corporate experience and are knowledgeable in the fi eld of executive compensation. In addition, the RC has access to expert professional advice on remuneration matters as and when necessary.
PEC LTD.Annual Report 2009
28
CORPORATE GOVERNANCE
The responsibilities of the RC include the following:
• to review directors' fees in a formal and transparent manner to ensure that they are at suffi ciently competitive levels;
• to administer the PEC Employee Share Option Scheme;
• to review and advise the Board on the terms of appointment and remuneration of its members, Group CEO, key executive offi cers, senior management of the Group and all managerial staff who are related to any of the directors or the Group CEO or substantial shareholders;
• to review the terms of the employment arrangements with the Management so as to develop consistent group wide employment practices subject to regional differences;
• to recommend to the Board, in consultation with senior management and the Chairman of the Board, any long term incentive scheme; and
• to review and approve any proposals or recommendations relating to senior management’s remuneration.
The RC reviews all aspects of remuneration and compensation packages, including but not limited, to directors’ fees, salaries, allowances, bonuses and benefi ts-in-kind.
No director is involved in determining his own remuneration.
The RC held one (1) meeting after the Company’s admission to the Offi cial List of the SGX-ST.
Level and Mix of Remuneration
Principle 8 : The level of remuneration should be appropriate to attract, retain and motivate the directors needed to run the company successfully but companies should avoid paying more than is necessary for this purpose. A signifi cant proportion of executive directors’ remuneration should be structured so as to link rewards to corporate and individual performance.
In setting remuneration packages, the RC will take into consideration the prevailing economic situation, the pay and employment conditions within the industry and in comparable companies. As part of its review, the RC ensures that the performance-related elements of remuneration form a signifi cant part of the total remuneration package of executive directors and is designed to align the directors’ interests with those of shareholders and link rewards to corporate and individual performance. The RC also reviews all matters concerning the remuneration of non-executive directors to ensure that the remuneration commensurate with the contribution and responsibilities of the directors. The Company will submit the quantum of directors’ fees of each year to the shareholders for approval at each Annual General Meeting.
Non-executive directors have no service contracts. The executive directors have service contracts, details of which appeared on pages 122 and 123 of the Company’s Prospectus dated 30 July 2009.
PEC LTD.Annual Report 2009
29
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
CORPORATE GOVERNANCE
The Company adopted an employee share option scheme known as “PEC Employee Share Option Scheme” (“ESOS”) on 25 June 2009 as a long term incentive plan for directors and employees of the Group whose services are vital to the Group’s well being and success. It is administered by the RC. No options have to-date been granted under the ESOS. Details of the ESOS appeared on pages 124 to 131 and Appendix F of the Company’s Prospectus dated 30 July 2009.
Disclosure on Remuneration
Principle 9 : Each company should provide clear disclosure of its remuneration policy, level and mix of remuneration, and the procedure for setting remuneration, in the company’s annual report. It should provide disclosure in relation to its remuneration policies to enable investors to understand the link between remuneration paid to directors and key executives, and performance.
A breakdown (in percentage terms) of the remuneration of the directors and the top 5 key executives (who are not also directors) for the fi nancial year ended 30 June 2009 are set out below:
Remuneration of the directors
Remuneration band and names of directors Salary Performance
Bonus (1)Directors’
fees (2) Total
Above S$1,000,000Edna Ko Poh Thim 6% 93% 1% 100%
Robert Dompeling 13% 86% 1% 100%
Wong Peng 18% 80% 2% 100%
Below S$250,000Dr Foo Fatt Kah – – 100% 100%
Chia Kim Huat – – 100% 100%
Ho Yew Mun – – 100% 100%
PEC LTD.Annual Report 2009
30
CORPORATE GOVERNANCE
Remuneration of top 5 key executives (who are not directors)
Remuneration band and names of key executives(who are not directors) Salary
Performance Bonus (1) Total
S$250,000 – S$499,999Chee Kok Shine 44% 56% 100%
John Lim Yeu Siang 48% 52% 100%
Fan Ming Keong 46% 54% 100%
Below S$250,000Gan Tong Nong 51% 49% 100%
Toh Boon Chuan 49% 51% 100%
(1) These are under the service contract. Under the service contract, each of our executive directors is also entitled to a performance bonus (the “Performance Bonus”) in respect of each fi nancial year commencing from and including FY2009, which is calculated based on the consolidated profi t before tax and extraordinary items (“PBT”) (before deducting for such Performance Bonus) of the Group.
(2) The directors’ fees are subject to the approval of the shareholders at the Annual General Meeting.
Information as disclosed in page 120 of Company’s Prospectus dated 30 July 2009 under Remuneration of employees/persons who are immediate family members of our Directors and Substantial Shareholders is still applicable, except that their aggregate remuneration was less than S$60,000 during the fi nancial year ended 30 June 2009 .
(C) ACCOUNTABILITY AND AUDIT
Accountability
Principle 10 : The Board should present a balanced and understandable assessment of the company’s performance, position and prospects.
The Board endeavours to ensure that the annual audited fi nancial statements and quarterly announcements of the Group’s results present a balanced and understandable assessment of the Group’s position and prospects. The Board embraces openness and transparency in the conduct of the Company’s affairs, whilst preserving the commercial interests of the Company. Financial and other price sensitive information are disseminated to shareholders through announcements via SGXNET.
Management currently provides the Board with appropriately management accounts of the Group’s performance, position and prospect on a regular basis.
PEC LTD.Annual Report 2009
31
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
CORPORATE GOVERNANCE
Audit Committee
Principle 11 : The Board should establish an Audit Committee (“AC”) with written terms of reference which clearly set out its authority and duties.
The AC comprises of entirely non-executive and independent directors:
Ho Yew Mun (Chairman) Chia Kim Huat Dr Foo Fatt Kah
It, inter alia, oversees the quality and integrity of the accounting, auditing, internal controls and fi nancial practices of the Group.
All members of the AC have many years of experience in senior management positions in fi nancial, legal and industrial sectors. The Board is of the view that the AC members, having accounting and related fi nancial management expertise or experience, are appropriately qualifi ed to discharge their responsibilities.
After the Company’s admission to the Offi cial List of the SGX-ST, the AC held one (1) meeting with the Management and the external auditors of the Company to discuss and review the following matters:
• the external auditors’ report arising from their audit;
• the adequacy of the assistance and cooperation given by the Company's Management to the external auditors;
• the fi nancial statements of the Company and the consolidated fi nancial statements of the Group;
• the annual announcement of the results of the Group before submission to the Board for approval;
• the adequacy of the Group's internal controls in respect of the management, business and service systems and practices;
• the cost effectiveness, independence and objectivity of the external auditors;
• the approval of compensation to the external auditors; • the nature and extent of non-audit services provided by the external auditors; • the recommendation to the Board for the appointment or re-appointment of the external auditors of
the Company;
• to report actions and minutes of the AC to the Board with such recommendations as the AC considers appropriate;
• interested person transactions to ensure that the current procedures for monitoring of interested party transactions have been complied with; and
• the use of IPO proceeds.
PEC LTD.Annual Report 2009
32
CORPORATE GOVERNANCE
In performing its functions, the AC :
• met with the external auditors, without the presence of the Company's Management and reviewed the overall scope of the external audit and the assistance given by the Management to the auditors;
• has explicit authority to investigate any matter relating to the Group's accounting, auditing, internal controls and fi nancial practices brought to its attention with full access to records, resources and personnel to enable it to discharge its function properly; and
• has full access to and cooperation of the Management and full discretion to invite any director or executive offi cer to attend its meetings.
The external auditors have unrestricted access to the AC.
The AC has undertaken a review of all the non-audit services provided by the external auditors during the year under review and is satisfi ed that such services would not, in the AC's opinion, affect the independence of the external auditors. The AC recommends to the Board the re-appointment of Ernst & Young LLP as the external auditors of the Company at the forthcoming Annual General Meeting.
The Company has put in place a whistle-blowing policy endorsed by the AC, by which staff of the Group may, in confi dence, raise concerns about possible improprieties in matters of fi nancial reporting or other matters with the AC. The objective for such arrangement is to ensure independent investigation of such matters and for appropriate follow-up action.
Details of the primary functions of the AC appeared on pages 141 and 142 of the Company’s Prospectus dated 30 July 2009.
Internal Controls
Principle 12 : The Board should ensure that the Management maintains a sound system of internal controls to safeguard the shareholders’ investments and the company’s assets.
The Board ensures that the management maintains a sound system of internal controls and effective risk management policies to safeguard the shareholders’ investment and the Company’s assets.
The Board believes that, in the absence of any evidence to the contrary, the system of internal controls maintained by the Group’s management throughout the fi nancial year ended 30 June 2009 up to the date of this report is adequate to meet the needs of the Group in its current business environment.
The system of internal control provides reasonable, but not absolute, assurance that the Group will not be adversely affected by any event that could be reasonably foreseen as it strives to achieve its business objectives.
However, the Board notes that no system of internal control can provide absolute assurance against the occurrence of material errors, poor judgement in decision-making, human error, losses, fraud or other irregularities.
PEC LTD.Annual Report 2009
33
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
CORPORATE GOVERNANCE
Risks arising from the Group’s fi nancial operations are separately discussed in the notes to the fi nancial statements on pages 89 to 93.
Internal Audit
Principle 13 : The company should establish an internal audit function that is independent of the activities it audits.
The AC and the Management are currently in discussion with professional accounting fi rms on the establishment of an internal audit function.
The AC will review the internal auditors’ reports and approve annual audit plans and resources to ensure that the internal auditors have the necessary resources to adequately perform its functions.
(D) COMMUNICATION WITH SHAREHOLDERS
Communication with Shareholders
Principle 14 : Companies should engage in regular, effective and fair communication with shareholders.
Principle 15 : Companies should encourage greater shareholder participation at AGMs, and allow shareholders the opportunity to communicate their views on various matters affecting the company.
The Company believes that a high standard of disclosure is key to raising the level of corporate governance. Quarterly results will be published through the SGXNET, news releases and the Company’s website. All information of the Company’s new initiatives are fi rst disseminated via SGXNET followed by a news release, which is also available on the website.
The Company does not practice selective disclosure. Price sensitive information is publicly released and results and annual reports are announced or issued within the mandatory period and are available on the Company’s website. All shareholders of the Company receive the annual report and notice of Annual General Meeting (“AGM”). The notice of AGM is also advertised in a newspaper.
The Company welcomes the views of the shareholders on matters concerning the Company and encourages shareholders’ participation at Annual General Meetings. The chairmen of the AC, NC and RC of the Company will be present at the general meetings to answer questions from the shareholders. The external auditors will also be present to assist the directors in addressing any relevant queries by shareholders.
The Company is not implementing absentia voting methods such as voting via mail, e-mail or fax until security, integrity and other pertinent issues are satisfactorily resolved.
Each item of special business included in the notice of the meeting is accompanied, where appropriate, by an explanation for the proposed resolution. Separate resolutions are proposed for substantially separate issues at the meeting.
PEC LTD.Annual Report 2009
34
CORPORATE GOVERNANCE
(E) DEALINGS IN SECURITIES
The Company has issued a guideline on share dealings to all directors and key employees (including employees with access to price sensitive information on the Company’s shares) of the Group which sets out the code of conduct on transactions in the Company’s shares by these persons, the implications of insider trading and general guidance on such dealings.
In line with Listing Rule 1207(18) issued by the SGX-ST, the Company issues a notifi cation to all offi cers of the Company informing them that they should not deal in the securities of the Company during the periods commencing one month before the announcement of the Company’s full-year results and two weeks before the Company’s quarterly or half-year results until after the announcement. They are also discouraged from dealing in the Company’s shares on short term considerations.
The Board confi rms that for the fi nancial year ended 30 June 2009, the Company has complied with Listing Rule 1207(18).
(F) INTERESTED PERSON TRANSACTION
As a listed company on the SGX-ST, the Company is required to comply with Chapter 9 of the Listing Manual of the SGX-ST on interested person transactions. To ensure compliance with Chapter 9, the Company has adopted guidelines for future interested person transactions and procedures for on-going and future interested person transactions as stated on pages 138 to 140 of the Company’s Prospectus dated 30 July 2009.
Save as disclosed under “Interested Person Transactions” (pages 132 to 134) in the Company’s Prospectus dated 30 July 2009, there are no new interested person transactions between the Group and any of its interested persons (namely, directors, or controlling shareholders of the Company or the associates of such directors or controlling shareholders).
The aggregate value of the interested person transaction entered during the fi nancial year under review is as follow:
Name of Interested Person
Aggregate value of all interested person transaction
during the fi nancial year under review (excluding
transaction less than $100,000 and transaction
conducted undershareholders’ mandate pursuant to Rule 920)
Aggregate value of all interested person transaction
conducted under shareholders’ mandate pursuant to Rule 920
(excluding transactionless than $100,000)
S$’000 S$’000
Tian San Shipping (Private) Limited 1,455 NIL
Tian San Company (Pte.) Limited 201 NIL
PEC LTD.Annual Report 2009
35
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
CORPORATE GOVERNANCE
(G) MATERIAL CONTRACTS
Save as disclosed under “Material Contracts” (page 147 of the Company’s Prospectus dated 30 July 2009) and a Subscription Agreement entered into by the Company and Far Frontier Energy Services Sdn Bhd on 11 September 2009 relating to the subscription of shares of PEC (Malaysia) Sdn Bhd, there are no other material contracts entered by the Company or its subsidiaries with or for the benefi ts of the directors or controlling shareholders during the fi nancial year ended 30 June 2009.
(H) USE OF IPO PROCEEDS
The Company refers to the net IPO proceeds amounted to S$ 21.2 million raised from the initial public offering and Over-allotment Option of S$5.0 million.
The following table details the utilisation of IPO proceeds up to 31 August 2009:
Use of net proceeds
Amount allocated(S$’000)
Amount utilised
(S$’000)Balance(S$’000)
To construct a new fabrication facility in the Middle East 8,000 – 8,000
To acquire or repay bank borrowings for the acquisition of new construction equipment and machinery 5,000 (2,279) 2,721
To fund our expansion by way of strategic alliances and/ or joint-venture, acquisition of, and investment in, related business 7,000 – 7,000
Working capital and general corporate purposes 6,200 – 6,200
Total 26,200 (2,279) 23,921
Up to 31 August 2009, 8.7% of our IPO proceeds have been utilised.
36
REPORT OF THE DIRECTORS
PEC LTD.Annual Report 2009
The Directors are pleased to present their report to the members together with the audited consolidated fi nancial statements of PEC Ltd. (the “Company”) and its subsidiaries (the “Group”) and the balance sheet and statement of changes in equity of the Company for the fi nancial year ended 30 June 2009.
Directors
The Directors of the Company in offi ce at the date of this report are:
Edna Ko Poh Thim Wong PengRobert Dompeling Dr Foo Fatt Kah (appointed on 25.6.2009)Ho Yew Mun (appointed on 25.6.2009)Chia Kim Huat (appointed on 25.6.2009)
Arrangements to enable directors to acquire shares and debentures
Neither at the end of nor at any time during the fi nancial year was the Company a party to any arrangement whose objects are, or one of whose object is, to enable the Directors of the Company to acquire benefi ts by means of the acquisition of shares or debentures of the Company or any other body corporate.
Directors’ interests in shares and debentures The following Directors, who held offi ce at the end of the fi nancial year, had, according to the register of Directors’ shareholdings required to be kept under section 164 of the Singapore Companies Act, Cap. 50, an interest in shares and share options of the Company and related corporations (other than wholly-owned subsidiaries) as stated below:
Direct interest Deemed interest
Name of directorAt beginning of the year
At endof the year
At 21 July 2009
At beginning of the year
At endof the year
At 21 July 2009
Ordinary shares
The CompanyPEC Ltd.
Edna Ko Poh Thim 850,000 34,125,000 34,125,000 2,450,000 85,750,000 85,750,000
Wong Peng 150,000 5,250,000 5,250,000 – – –
Except as disclosed in this report, no Director who held offi ce at the end of the fi nancial year had interests in shares, share options, warrants or debentures of the Company, or of related corporations, either at the beginning of the fi nancial year, (or date of appointment if later) or at the end of the fi nancial year.
37
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
REPORT OF THE DIRECTORS
PEC LTD.Annual Report 2009
Directors’ contractual benefi ts
Except as disclosed in the fi nancial statements, since the end of the previous fi nancial year, no Director of the Company has received or become entitled to receive a benefi t by reason of a contract made by the Company or a related corporation with the Director, or with a fi rm of which the Director is a member, or with a company in which the Director has a substantial fi nancial interest.
Share options
The Company adopted an employee share option scheme known as “PEC Employee Share Option Scheme” (“ESOS”) on 25 June 2009 as a long term incentive plan for directors and employees of the Group whose services are vital to the Group’s well being and success. No options have to-date been granted under the ESOS.
The ESOS is administered by the Remuneration Committee. The members are Dr Foo Fatt Kah (Chairman), Mr Ho Yew Mun and Mr Chia Kim Huat, whom are independent directors.
The ESOS entitles eligible participants to subscribe for ordinary shares in the Company at a price equal to the average of the closing prices of the shares on the SGX-ST on the fi ve trading days immediately preceding the date of the grant of the option (“Market Price”) or at a discount to the Market Price (up to a maximum of 20%). The number of shares in respect of which options may be granted when aggregated with those granted under any other share option schemes of the Company and for the time being in force, shall not exceed 15% of the issued share capital of the Company on the date preceding the date of the relevant grant.
Audit Committee
The Audit Committee comprises of entirely non-executive independent directors, namely, Mr Ho Yew Mun (Chairman), Mr Chia Kim Huat and Dr Foo Fatt Kah. The Audit Committee has performed the primary functions required, details of which appeared in the Corporate Governance Report.
38
REPORT OF THE DIRECTORS
PEC LTD.Annual Report 2009
Auditors
Ernst & Young LLP have expressed their willingness to accept reappointment as auditors.
On behalf of the Board of Directors,
Edna Ko Poh ThimDirector
Wong PengDirector
Singapore9 September 2009
39
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
STATEMENT BY DIRECTORS
PEC LTD.Annual Report 2009
We, Edna Ko Poh Thim and Wong Peng, being two of the Directors of PEC Ltd., do hereby state that, in the opinion of the Directors:
(i) the accompanying balance sheets, consolidated income statement, statements of changes in equity, and consolidated cash fl ow statement together with notes thereto are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 30 June 2009 and the results of the business, changes in equity and cash fl ows of the Group and the changes in equity of the Company for the year ended on that date, and
(ii) at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.
On behalf of the Board of Directors,
Edna Ko Poh ThimDirector
Wong PengDirector
Singapore9 September 2009
40
INDEPENDENT AUDITORS’ REPORTto the Members of PEC LTD.
PEC LTD.Annual Report 2009
We have audited the accompanying fi nancial statements of PEC Ltd. (the “Company”) and its subsidiaries (collectively the “Group”), set out on pages 42 to 102 which comprise the balance sheets of the Group and the Company as at 30 June 2009, the statements of changes in equity of the Group and the Company, the income statement and cash fl ow statement of the Group for the year then ended, and a summary of signifi cant accounting policies and other explanatory notes.
Management’s responsibility for the fi nancial statements
Management is responsible for the preparation and fair presentation of these fi nancial statements in accordance with the provisions of the Singapore Companies Act, Cap. 50 (the “Act”) and Singapore Financial Reporting Standards. This responsibility includes devising and maintaining a system of internal accounting controls suffi cient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profi t and loss accounts and balance sheets and to maintain accountability of assets; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
Auditors’ responsibility
Our responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the fi nancial statements 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 entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the fi nancial statements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
41
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
INDEPENDENT AUDITORS’ REPORTto the Members of PEC LTD.
PEC LTD.Annual Report 2009
Opinion
In our opinion,
(i) the consolidated fi nancial statements of the Group and the balance sheet and statement of changes in equity of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 30 June 2009 and the results, changes in equity and cash fl ows of the Group and the changes in equity of the Company for the year ended on that date; and
(ii) the accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.
Ernst & Young LLPPublic Accountants andCertifi ed Public Accountants
Singapore9 September 2009
42
CONSOLIDATED INCOME STATEMENTfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
Note 2009 2008$ $
Revenue 4 440,478,726 314,647,746
Cost of sales (349,035,398) (233,819,343)
Gross profi t 91,443,328 80,828,403
Other operating income 5 3,822,750 3,198,883
ExpensesAdministrative expenses (23,651,518) (23,285,820)
Other operating expenses (40,558,112) (26,849,454)
Finance expenses 6 (337,209) (748,922)
Share of results of associates (561,153) 359,880
Share of results of joint venture 27,474 61,282
Profi t before tax 7 30,185,560 33,564,252
Taxation 8 (5,639,601) (6,559,577)
Profi t for the year 24,545,959 27,004,675
Attributable to Shareholders of the Company 20,964,741 25,098,281
Minority interests 3,581,218 1,906,394
24,545,959 27,004,675
Earnings per share Cents Cents
Basic and diluted 37 12.0 14.3
The accompanying accounting policies and explanatory notes form an integral part of the fi nancial statements.
43
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
BALANCE SHEETSas at 30 June 2009
PEC LTD.Annual Report 2009
Group CompanyNote 2009 2008 2009 2008
$ $ $ $
Non-current assetsProperty, plant and equipment 9 56,381,971 42,146,534 35,189,594 29,732,509
Available-for-sale quoted investments 10 130,316 195,576 130,316 195,576
Investment in subsidiaries 11 – – 9,676,618 10,005,738
Investment in joint venture 12 138,756 111,282 – –
Investment in associates 13 881,232 1,442,385 220,000 220,000
Intangibles 14 276,000 234,500 276,000 234,500
Land use rights 15 1,103,903 1,031,011 – –
58,912,178 45,161,288 45,492,528 40,388,323
Current assetsInventories 16 28,127 20,964 – –
Contracts-in-progress (net of progress billings) 17 56,685,064 15,039,572 29,833,240 34,720,918
Trade receivables 18 39,395,794 55,911,132 26,598,308 37,302,122
Trade receivables from subsidiaries 18 – – 1,527,925 253,265
Trade receivables from associates 18 921,198 9,143,560 21,375 22,852
Trade receivables from related parties 18 7,673 1,455,939 963 963
Other receivables, deposits and prepayments 19 5,531,574 12,680,160 4,550,062 3,357,641
Derivative fi nancial assets 20 47,892 423,787 – –
Loan due from an associate 21 210,215 – – –
Cash and cash equivalents 22 52,414,517 48,944,056 34,575,360 25,531,218
155,242,054 143,619,170 97,107,233 101,188,979
44
BALANCE SHEETSas at 30 June 2009
PEC LTD.Annual Report 2009
Group CompanyNote 2009 2008 2009 2008
$ $ $ $
Current liabilitiesTrade payables 23 31,381,296 27,341,922 18,871,266 19,360,761
Trade payables to subsidiaries 23 – – 437,420 2,239,954
Trade payables to associates 23 28,449 273,379 28,449 260,108
Trade payables to related parties 23 525,883 3,756,179 66,843 46,575
Other payables and accruals 24 49,948,726 47,348,682 39,743,130 37,401,437
Short-term fi nancing loan – 1,638,120 – –
Derivative fi nancial liabilities 20 1,398 32,540 – –
Current portion of non-current borrowings, secured 25 133,329 232,168 13,183 22,600
Amount due to minority interest – 396,542 – –
Dividend payable 38 8,000,000 – 8,000,000 –
Provision for tax 4,444,909 5,451,610 69,441 3,007,627
94,463,990 86,471,142 67,229,732 62,339,062
Net current assets 60,778,064 57,148,028 29,877,501 38,849,917
Non-current liabilitiesNon-current borrowings, secured 25 13,117 140,796 – 7,533
Deferred tax liabilities 26 3,410,967 2,619,051 3,093,984 2,301,846
(3,424,084) (2,759,847) (3,093,984) (2,309,379)
116,266,158 99,549,469 72,276,045 76,928,861
Share capital and reservesShare capital 27 25,000,000 5,000,000 25,000,000 5,000,000
Statutory reserves 28 505,311 391,490 – –
Fair value reserves 29 106,041 171,301 106,041 171,301
Retained earnings 79,606,678 90,276,200 47,170,004 71,757,560
Foreign currency translation reserves 30 (243,224) (608,768) – –
104,974,806 95,230,223 72,276,045 76,928,861
Minority interests 11,291,352 4,319,246 – –
Total equity 116,266,158 99,549,469 72,276,045 76,928,861
The accompanying accounting policies and explanatory notes form an integral part of the fi nancial statements.
45
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
STATEMENT OF CHANGES IN EQUITYfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
Attri
buta
ble
to e
quity
hol
ders
of t
he C
ompa
ny
Shar
eca
pita
lSt
atut
ory
rese
rves
Reta
ined
ea
rnin
gsFa
ir va
lue
rese
rves
Fore
ign
curr
ency
tra
nsla
tion
rese
rves
Tota
lM
inor
ity
inte
rests
Tota
leq
uity
$$
$$
$$
$$
Gro
upAt
1 J
uly
2007
5,00
0,00
023
0,37
665
,777
,185
353,
993
(267
,834
)71
,093
,720
2,55
0,00
373
,643
,723
Net
cha
nge
in fa
ir v
alue
r
eser
ves
–
–
–
(182
,692
)–
(1
82,6
92)
–
(182
,692
)
Net
effe
ct o
f exc
hang
e d
iffer
ence
s–
–
–
–
(3
40,9
34)
(340
,934
)(3
3,64
1)(3
74,5
75)
Dilu
tion
of in
tere
st in
s
ubsi
diar
y–
–
(1
88,1
52)
–
–
(188
,152
)29
9,03
211
0,88
0
Net
exp
ense
rec
ogni
sed
dir
ectly
in e
quity
–
–
(188
,152
)(1
82,6
92)
(340
,934
)(7
11,7
78)
265,
391
(446
,387
)
Profi
t fo
r th
e ye
ar–
–
25
,098
,281
–
–
25,0
98,2
811,
906,
394
27,0
04,6
75
Tota
l rec
ogni
sed
inco
me
and
exp
ense
for
the
year
–
–
24,9
10,1
29(1
82,6
92)
(340
,934
)24
,386
,503
2,17
1,78
526
,558
,288
Tran
sfer
to s
tatu
tory
res
erve
s –
16
1,11
4(1
61,1
14)
–
–
–
–
–
Div
iden
d on
ord
inar
y sh
ares
(
Not
e 38
)–
–
(2
50,0
00)
–
–
(250
,000
)–
(2
50,0
00)
Div
iden
d pa
id to
min
ority
s
hare
hold
ers
of a
sub
sidi
ary
–
–
–
–
–
–
(402
,542
)(4
02,5
42)
At 3
0 Ju
ne 2
008
5,00
0,00
039
1,49
090
,276
,200
171,
301
(608
,768
)95
,230
,223
4,31
9,24
699
,549
,469
46
STATEMENT OF CHANGES IN EQUITYfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
Attri
buta
ble
to e
quity
hol
ders
of t
he C
ompa
ny
Shar
eca
pita
lSt
atut
ory
rese
rves
Reta
ined
ea
rnin
gsFa
ir va
lue
rese
rves
Fore
ign
curr
ency
tra
nsla
tion
rese
rves
Tota
lM
inor
ity
inte
rests
Tota
leq
uity
$$
$$
$$
$$
Gro
upAt
1 J
uly
2008
5,00
0,00
039
1,49
090
,276
,200
171,
301
(608
,768
)95
,230
,223
4,31
9,24
699
,549
,469
Net
cha
nge
in fa
ir v
alue
r
eser
ves
–
–
–
(65,
260)
–
(65,
260)
–
(65,
260)
Net
effe
ct o
f exc
hang
e d
iffer
ence
s–
–
–
–
36
5,54
436
5,54
411
5,32
648
0,87
0
Dilu
tion
of in
tere
st in
s
ubsi
diar
y–
–
(3
,270
,442
)–
–
(3
,270
,442
)3,
699,
562
429,
120
Net
(ex
pens
e)/i
ncom
e r
ecog
nise
d di
rect
ly in
equ
ity–
–
(3
,270
,442
)(6
5,26
0)36
5,54
4(2
,970
,158
)3,
814,
888
844,
730
Profi
t fo
r th
e ye
ar–
–
20
,964
,741
–
–
20,9
64,7
413,
581,
218
24,5
45,9
59
Tota
l rec
ogni
sed
inco
me
and
exp
ense
for
the
year
–
–
17,6
94,2
99(6
5,26
0)36
5,54
417
,994
,583
7,39
6,10
625
,390
,689
Tran
sfer
to s
tatu
tory
r
eser
ves
–
113,
821
(113
,821
)–
–
–
–
–
Div
iden
d on
ord
inar
y s
hare
s (N
ote
38)
–
–
(8,2
50,0
00)
–
–
(8,2
50,0
00)
–
(8,2
50,0
00)
Div
iden
d pa
id to
min
ority
s
hare
hold
ers
of a
s
ubsi
diar
y–
–
–
–
–
–
(4
24,0
00)
(424
,000
)
Issu
ance
of b
onus
sha
res
20,0
00,0
00–
(2
0,00
0,00
0)–
–
–
–
–
At 3
0 Ju
ne 2
009
25,0
00,0
0050
5,31
179
,606
,678
106,
041
(243
,224
)104
,974
,806
11,2
91,3
5211
6,26
6,15
8
47
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
STATEMENT OF CHANGES IN EQUITYfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
Sharecapital
Retained earnings
Fair value reserves Total
$ $ $ $
CompanyAt 1 July 2007 5,000,000 56,226,204 353,993 61,580,197
Net change in fair value reserves – – (182,692) (182,692)
Net expense recognised directly in equity – – (182,692) (182,692)
Profi t for the year – 15,781,356 – 15,781,356
Total recognised income and expense for the year – 15,781,356 (182,692) 15,598,664
Dividend on ordinary shares (Note 38) – (250,000) – (250,000)
At 30 June 2008 5,000,000 71,757,560 171,301 76,928,861
At 1 July 2008 5,000,000 71,757,560 171,301 76,928,861
Net change in fair value reserves – – (65,260) (65,260)
Net expense recognised directly in equity – – (65,260) (65,260)
Profi t for the year – 3,662,444 – 3,662,444
Total recognised income and expense for the year – 3,662,444 (65,260) 3,597,184
Issuance of bonus shares 20,000,000 (20,000,000) – –
Dividend on ordinary shares (Note 38) – (8,250,000) – (8,250,000)
At 30 June 2009 25,000,000 47,170,004 106,041 72,276,045
The accompanying accounting policies and explanatory notes form an integral part of the fi nancial statements.
48
CONSOLIDATED CASH FLOW STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
2009 2008$ $
Cash fl ows from operating activitiesProfi t before tax 30,185,560 33,564,252
Adjustments for:
Depreciation of property, plant and equipment 7,387,845 5,809,352
Net loss/(gain) on disposal of property, plant and equipment 109,727 (54,741)
Currency realignment 16,736 (224,023)
Amortisation of land use rights 24,606 22,725
Share of results of associates 561,153 (359,880)
Share of results of joint venture (27,474) (61,282)
Interest income (316,721) (795,486)
Interest expense 58,742 34,635
Operating profi t before working capital changes 38,000,174 37,935,552
Increase in inventories (7,163) (1,581)
Decrease/(increase) in trade and other receivables 23,663,924 (32,039,671)
Decrease/(increase) in trade receivables from associates 8,222,362 (8,876,857)
Decrease/(increase) in trade receivables from related parties 1,448,266 (1,013,360)
Increase in trade and other payables 6,639,418 27,738,255
Decrease in trade payables to associates (244,930) (107,583)
(Decrease)/increase in trade payables to related parties (3,230,296) 3,716,222
(Increase)/decrease in contracts in progress (41,645,492) 4,682,505
Decrease/(increase) in derivative fi nancial instruments 344,753 (391,247)
Cash generated from operations 33,191,016 31,642,235
Tax paid (5,854,386) (4,744,587)
Interest paid (58,742) (34,635)
Net cash generated from operating activities 27,277,888 26,863,013
49
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
CONSOLIDATED CASH FLOW STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
2009 2008$ $
Cash fl ows from investing activitiesInterest received 316,721 795,486
Proceeds from disposal of property, plant and equipment 76,843 64,625
Acquisition of intangible (41,500) (42,000)
Purchase of property, plant and equipment (21,419,420) (16,209,774)
Acquisition of land use rights (23,796) –
Net cash used in investing activities (21,091,152) (15,391,663)
Cash fl ows from fi nancing activitiesProceeds from borrowings – 1,638,120
Repayment of borrowings (226,518) (78,835)
Repayment of short term fi nancing loan (1,638,120) –
Proceeds from fi nance lease obligations – 131,906
Proceeds from dilution of interest in a subsidiary 429,120 110,880
Repayment of loan by an associate – 41,700
Loan due from an associate (210,215) –
Additional fi xed deposits pledged to the bank for bank facilities (1,050,000) –
Dividends paid to minority interest (820,542) (6,000)
Dividends paid (250,000) (250,000)
Net cash (used in)/generated from fi nancing activities (3,766,275) 1,587,771
Net increase in cash and cash equivalents 2,420,461 13,059,121
Cash and cash equivalents at 1 July 47,944,056 34,884,935
Cash and cash equivalents at end of year (Note 22) 50,364,517 47,944,056
The accompanying accounting policies and explanatory notes form an integral part of the fi nancial statements.
50
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
1. Corporate information
PEC Ltd. (the “Company”) is a public limited liability company which is incorporated in Singapore. With effect from 25 June 2009, the name of the Company was changed from Plant Engineering Construction Private Limited to PEC Pte. Ltd.. In connection with the conversion of the Company from a private limited company to a public limited company, the name of the Company was changed from PEC Pte. Ltd. to PEC Ltd. with effect from 3 July 2009.
On 7 August 2009, the Company was admitted to the Main Board of the Singapore Exchange Securities Trading Limited.
The Company’s registered offi ce is located at 21 Shipyard Road, Singapore 628144.
The principal activities of the Company are the provision of mechanical engineering and contracting services. The principal activities of the subsidiaries are disclosed in Note 11 to the fi nancial statements.
2. Summary of signifi cant accounting policies
2.1 Basis of preparation
The consolidated fi nancial statements of the Group and the balance sheet and statement of changes in equity of the Company have been prepared in accordance with Singapore Financial Reporting Standards (“FRS”).
The fi nancial statements have been prepared on a historical cost basis except for available-for-sale quoted investments and leasehold land and building that have been measured at their fair values and are presented in Singapore dollars (SGD or $).
The accounting policies have been consistently applied by the Group and the Company and are consistent with those used in the previous fi nancial year.
51
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
2. Summary of signifi cant accounting policies (cont’d)
2.2 FRS and Interpretation of Financial Reporting Standard (“INT FRS”) not yet effective
The Group and the Company have not applied the following FRS and INT FRS that have been issued but not yet effective:
Effective date (annual periods beginning on
or after)
FRS 1 : Presentation of Financial Statements (revised) 1 January 2009
FRS 23 : Borrowing costs (revised) 1 January 2009
FRS 32 : Financial Instruments: Presentation – Amendments relating to Puttable Financial Instruments and Obligations Arising on Liquidation
1 January 2009
FRS 102 : Share-based Payments – Amendments Relating to Vesting Conditions and Cancellations
1 January 2009
FRS 108 : Operating Segments 1 January 2009
INT FRS 1 : First-Time Adoption of International Financial Reporting Standards, Amendments Relating to Cost of an Investment in a Subsidiary, Joint Controlled Entity or Associate
1 November 2009
INT FRS 2 : Share-based Payment – Vesting Conditions and Cancellations 1 November 2009
INT FRS 3 : Business Combinations (Revised) 1 November 2009
INT FRS 8 : Operating Segments 1 November 2009
The Directors expect that the adoption of the above pronouncements will have no material impact to the fi nancial statements in the period of initial application, except for the amendment to FRS 1 and FRS 108 as indicated below.
FRS 1 requires owner and non-owner changes in equity to be presented separately. The statement of changes in equity will include only details of transactions with owners, with all non-owner changes in equity presented as a single line item. In addition, the revised standard introduces the statement of comprehensive income: it presents all items of income and expense recognised in profi t or loss, together with all other items of recognised income and expense, either in one single statement, or in two linked statements. The Group is currently evaluating the format to adopt.
FRS 108 requires entities to disclose segment information based on the information reviewed by the entity’s chief operating decision maker. The impact of this standard on the other segment disclosures is still to be determined. As this is a disclosure standard, it will have no impact on the fi nancial position or fi nancial performance of the Group when implemented in 2009.
52
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
2. Summary of signifi cant accounting policies (cont’d)
2.3 Basis of consolidation
The consolidated fi nancial statements comprise the fi nancial statements of the Company and its subsidiaries as at the balance sheet date.
The fi nancial year of the Company and all its subsidiaries in the Group ends on 30 June except for the following subsidiaries, which have a fi nancial year ending 31 December as required by the laws of its country of incorporation:
• Huizhou Tianxin Petrochemical Engineering Co., Ltd,
• PEC Construction Equipment Leasing Co., (Huizhou) Ltd,
• PEC Technology Consultancy Services (Huizhou) Ltd.; and
• PT PEC Anugerah Sejahtera
The consolidated fi nancial statements incorporate the results of these subsidiaries for the period from 1 July 2008 to 30 June 2009.
Consistent accounting policies are applied for like transactions and events in similar circumstances.
All intra-group balances, transactions, income and expenses and profi ts and losses resulting from intra-group transactions that are recognised in assets, are eliminated in full.
Acquisitions of subsidiaries are accounted for using the purchase method. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.
Minority interests represent the portion of profi t or loss and net assets in subsidiaries not held by the Group. They are presented in the consolidated balance sheet within equity, separately from the parent shareholders’ equity, and are separately disclosed in the consolidated income statement.
2.4 Transactions with minority interests
Minority interests represent the portion of profi t or loss and net assets in subsidiaries not held by the Group and are presented separately in the consolidated income statement and within equity in the consolidated balance sheet, separately from parent shareholders’ equity. Transactions with minority interests are accounted for using the entity concept method, whereby, transactions with minority interests are accounted for as transactions with equity holders. On acquisition of minority interests, the difference between the consideration and book value of the share of the net assets acquired is refl ected as being a transaction between owners and recognised directly in equity. Gain or loss on disposal of minority interests is recognised directly in equity.
53
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
2. Summary of signifi cant accounting policies (cont’d)
2.5 Foreign currency
Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.
Exchange differences arising on the settlement of monetary items or on translating monetary items at the balance sheet date are recognised in the income statement except for exchange differences arising on monetary items that form part of the Group’s net investment in foreign subsidiaries, which are recognised initially in equity as foreign currency translation reserve in the consolidated balance sheet and recognised in the consolidated income statement on disposal of the subsidiary.
The assets and liabilities of foreign operations are translated into SGD at the rate of exchange ruling at the balance sheet date and their income statements are translated at the weighted average exchange rates for the year. The exchange differences arising on the translation are taken directly to a separate component of equity as foreign currency translation reserve. On disposal of a foreign operation, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in the income statement.
2.6 Property, plant and equipment
All items of property, plant and equipment are initially recorded at cost. The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefi ts associated with the item will fl ow to the Group and the cost of the item can be measured reliably. Subsequent to recognition, plant and equipment and furniture and fi xtures are measured at cost less accumulated depreciation and accumulated impairment losses.
Depreciation is computed on a straight-line basis over the estimated useful lives of the assets as follows:
Leasehold land and buildings – 9 to 50 years
Plant machinery and site equipment – 3 to 15 years
Motor vehicles – 4 to 10 years
Offi ce equipment, furniture and fi ttings, and renovation – 3 to 10 years
Workshop, offi ce and staff quarters – 26 years
The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.
54
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
2. Summary of signifi cant accounting policies (cont’d)
2.6 Property, plant and equipment (cont’d)
The useful life and depreciation method are reviewed at each fi nancial 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 benefi ts 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 benefi ts are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is included in the income statement in the year the asset is derecognised.
2.7 Land use rights
Land use rights are carried at cost less accumulated amortisation. Amortisation is charged to the income statement on a straight line basis over the period of the rights, which ranges between 47.5 to 69.0 years.
2.8 Impairment of non-fi nancial assets
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount.
An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash infl ows that are largely independent of those from other assets or groups of assets. In assessing value in use, the estimated future cash fl ows are discounted to their present value using a pre-tax discount rate that refl ects current market assessments of the time value of money and the risks specifi c to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
Impairment losses are recognised in the income statement as ‘other operating expenses’.
An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses recognised for an asset may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Reversal of an impairment loss is recognised in the income statement. After such a reversal, the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.
55
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
2. Summary of signifi cant accounting policies (cont’d)
2.9 Subsidiaries
Investment in subsidiaries
A subsidiary is an entity over which the Group has the power to govern the fi nancial and operating policies so as to obtain benefi ts from its activities. The Group generally has such power when it, directly or indirectly, holds more than 50% of the issued share capital, or controls more than half of the voting power, or controls the composition of the board of directors.
In the Company’s separate fi nancial statements, investments in subsidiaries are accounted for at cost less any impairment losses.
2.10 Associates
An associate is an entity, not being a subsidiary or a joint venture, in which the Group has signifi cant infl uence. The associate is equity accounted for from the date the Group obtains signifi cant infl uence until the date the Group ceases to have signifi cant infl uence over the associate.
The Group’s investments in associates are accounted for using the equity method. Under the equity method, the investment in associate is measured in the balance sheet at cost plus post-acquisition changes in the Group’s share of net assets of the associate. Goodwill relating to an associate is included in the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the associate’s identifi able assets, liabilities and contingent liabilities over the cost of the investment is deducted from the carrying amount of the investment and is recognised as income as part of the Group’s share of profi t or loss of the associate in the period in which the investment is acquired.
When the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.
The fi nancial statements of the associate are prepared as of the same reporting date as the Company. Where necessary, adjustments are made to bring the accounting policies in line with those of the Group.
In the Company’s fi nancial statements, investment in associates are carried at cost less accumulated impairment loss.
56
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
2. Summary of signifi cant accounting policies (cont’d)
2.11 Joint venture
A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control, where the strategic fi nancial and operating decisions relating to the activity require the unanimous consent of the parties sharing control. The Group’s investment in joint venture is accounted for using the equity method. Under the equity method, the investment in joint venture is carried in the balance sheet at cost plus post-acquisition changes in the Group’s share of net assets of the joint venture. The Group’s share of the profi t or loss of the joint venture is recognised in the consolidated income statement. Where there has been a change recognised directly in the equity of the joint venture, the Group recognises its share of such changes. The joint venture is equity accounted for from the date the Group obtains joint control until the date the Group ceases to have signifi cant joint control over the joint venture.
The most recent available audited fi nancial statements of the joint venture are used by the Group in applying the equity method. Where the dates of the audited fi nancial statements used are not co-terminous with those of the Group, the share of results is arrived at from the last audited fi nancial statements available and un-audited management fi nancial statements to the end of the accounting period. Consistent accounting policies are applied for like transactions and events in similar circumstances.
2.12 Financial assets
Financial assets are classifi ed as loans and receivables, or available-for-sale fi nancial assets, as appropriate. Financial assets are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the fi nancial instrument.
When fi nancial assets are recognised initially, they are measured at fair value, plus, in the case of fi nancial assets not at fair value through profi t or loss, directly attributable transaction costs. The Group determines the classifi cation of its fi nancial assets after initial recognition and, where allowed and appropriate, re-evaluates this designation at each fi nancial year-end.
(a) Loans and receivables
Non-derivative fi nancial assets with fi xed or determinable payments that are not quoted in an active market are classifi ed as loans and receivables. Such assets are carried at amortised cost using the effective interest method, less impairment loss. Gains and losses are recognised in the income statement when the loans and receivables are derecognised or impaired, as well as through the amortisation process.
The Group classifi es the following fi nancial assets as loans and receivables:
• Cash and cash equivalents
• Other receivables
• Trade receivables, including amounts due from subsidiaries, associates and related parties
• Loan due from subsidiaries, associates and related parties
57
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
2. Summary of signifi cant accounting policies (cont’d)
2.12 Financial assets (cont’d)
(b) Available-for-sale fi nancial assets
The Group classifi es its investment securities as available-for-sale fi nancial assets.
Available-for-sale fi nancial assets are non-derivative fi nancial assets that are either designated in this category or not classifi ed in any of the other categories. After initial recognition, the fi nancial assets are recognised at fair value with gains or losses being recognised in equity until the assets are derecognised, or determined to be impaired, at which time the cumulative gain or loss previously reported in equity are transferred to the income statement.
The fair value of investments that are actively traded in organised fi nancial markets is determined by reference to the relevant Exchange’s quoted market bid prices at the close of business on the balance sheet date.
Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost less any impairment losses.
(c) Financial assets at fair value through profi t or loss
Financial assets at fair value through profi t or loss are fi nancial assets classifi ed as held for trading. Financial assets classifi ed as held for trading are derivatives (including separated embedded derivatives) or are acquired principally for the purpose of selling or repurchasing it in the near term.
Subsequent to initial recognition, fi nancial assets at fair value through profi t or loss are measured at fair value. Any gains or losses arising from changes in fair value of the fi nancial assets are recognised in the income statement. Net gains or net losses on fi nancial assets at fair value through profi t or loss include exchange differences, interest and dividend income.
2.13 Derecognition of fi nancial assets
A fi nancial asset is derecognised where the contractual rights to receive cash fl ows from the asset have expired.
On derecognition of a fi nancial asset, the difference between the carrying amount and the sum of (a) the consideration received and (b) any cumulative gain or loss that has been recognised directly in equity is recognised in the income statement.
58
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
2. Summary of signifi cant accounting policies (cont’d)
2.14 Impairment of fi nancial assets
The Group assesses at each balance sheet date whether there is any objective evidence that a fi nancial asset or a group of fi nancial assets is impaired.
(a) Assets carried at amortised cost
If there is objective evidence that an impairment loss on fi nancial assets carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash fl ows discounted at the fi nancial asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account. The amount of the loss is recognised in the income statement.
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. Any subsequent reversal of an impairment loss is recognised in the income statement, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.
(b) Assets carried at cost
If there is objective evidence that an impairment loss on a fi nancial asset carried at cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash fl ows discounted at the current market rate of return for a similar fi nancial asset. Such impairment losses are not reversed in subsequent periods.
(c) Available-for-sale fi nancial assets
If an available-for-sale fi nancial asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in the income statement, is transferred from equity to the income statement. Reversals of impairment loss in respect of equity instruments are not recognised in the income statement. Reversals of impairment losses on debt instruments are reversed through the income statement, if the increase in fair value of the instrument can be objectively related to an event occurring after the impairment loss was recognised in the income statement.
2.15 Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits. These also include bank overdrafts, which form an integral part of the Group’s cash management.
2.16 Contracts-in-progress
Contracts-in-progress in the balance sheet comprises actual costs and profi ts recognised less full provision for anticipated losses and progress billings. Contract costs include all direct material and labour costs and indirect costs related to contract performance.
59
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
2. Summary of signifi cant accounting policies (cont’d)
2.17 Inventories
Inventories are stated at the lower of cost and net realisable value. Costs incurred in bringing the inventories to their present location and conditions are accounted on a fi rst-in, fi rst-out basis.
2.18 Provisions
Provisions are recognised when the Group has a present obligation as a result of a past event, it is probable that an outfl ow of economic resources will be required to settle the obligation and the amount of the obligation can be estimated reliably.
Provisions are reviewed at each balance sheet date and adjusted to refl ect the current best estimate. If it is no longer probable that an outfl ow of economic resources will be required to settle the obligation, the provision is reversed. If the effect of the time value of money is material, provisions are discounted using a current pre tax rate that refl ects, where appropriate, the risks specifi c to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a fi nance cost.
2.19 Financial liabilities
Financial liabilities include trade payables, accrued operating expenses, amount due to minority interest, loans payable and hire purchase payables. Trade payables include payables to subsidiaries, associates and related parties which are normally settled on 30 - 90 day terms. Financial liabilities are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the fi nancial instrument. Financial liabilities are initially recognised at fair value of the consideration received less directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method.
Gains and losses are recognised in the income statement when the liabilities are derecognised as well as through the amortisation process. The liabilities are derecognised when the obligation under the liability is discharged or cancelled or expired.
2.20 Employee benefi ts
(a) Defi ned contribution plans
The Group participates in the national pension schemes as defi ned by the laws of the countries in which it has operations. In particular, the Singapore companies in the Group make contributions to the Central Provident Fund (“CPF”) scheme in Singapore, a defi ned contribution pension scheme. Contributions to national pension schemes are recognised as an expense in the period in which the related service is performed.
(b) Employee leave entitlement
Employee entitlements to annual leave are recognised as a liability when they accrue to employees. The estimated liability for leave is recognised for services rendered by employees up to balance sheet date.
60
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
2. Summary of signifi cant accounting policies (cont’d)
2.21 Leases
Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the fi nance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to the income statement. Contingent rents, if any, are charged as expenses in the periods in which they are incurred.
Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term.
Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term. The aggregate benefi t of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis.
2.22 Revenue
Revenue is recognised to the extent that it is probable that the economic benefi ts will fl ow to the Group and the revenue can be reliably measured. The following specifi c criteria must also be met before revenue is recognised:
(a) Contracts
The percentage of completion method is applied to all contracts with a project completion period of more than a year. Income recognition is based on the ratio of costs incurred to date on contracts to their estimated total costs.
Revenue from cost plus contracts is recognised by reference to the recoverable costs incurred during the period plus the fees earned measured in accordance with the contracts.
(b) Sale of equipment and goods
Revenue is recognised upon the transfer of signifi cant risk and rewards of ownership of the goods to the customer, which generally coincides with delivery and acceptance of the goods sold.
(c) Rental and Interest income
Rental and interest income is recognised as the rental and interest accrue (using the effective interest method) unless collectibility is in doubt.
(d) Dividend income
Dividend is recognised when the Group’s right to receive the payment is established.
61
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
2. Summary of signifi cant accounting policies (cont’d)
2.23 Income taxes
(a) Current tax
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.
(b) Deferred tax
Deferred income tax is provided using the liability method on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for fi nancial reporting purposes.
Deferred tax liabilities are recognised for all temporary differences, except:
• Where the deferred tax arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither accounting profi t nor taxable profi t or loss; and
• In respect of temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled by the Group and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred income tax assets are recognised for all deductible temporary differences (other than those mentioned above), carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profi t will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised.
The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that suffi cient taxable profi t will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profi t will allow the deferred tax asset to be recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.
Income tax relating to items recognised directly in equity is recognised directly in equity.
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.
62
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
2. Summary of signifi cant accounting policies (cont’d)
2.23 Income taxes (cont’d)
(c) Sales tax
Revenues, expenses and assets are recognised net of the amount of sales tax except:
• Where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
• Receivables and payables that are stated with the amount of sales tax included.
The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.
2.24 Segment reporting
A business segment is a distinguishable component of the Group that is engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is a distinguishable component of the Group that is engaged in providing products or services within a particular economic environment and that is subject to risks and returns that are different from those of components operating in other economic environments.
2.25 Contingencies
A contingent liability or asset is a possible obligation or asset that arises from past events and whose existence will be confi rmed only by the occurrence or non-occurrence of uncertain future event(s) not wholly within the control of the Group.
Contingent liabilities and assets are not recognised on the balance sheet of the Group.
3. Signifi cant accounting judgements and estimates
The preparation of the Group’s fi nancial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future.
63
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
3. Signifi cant accounting judgements and estimates (cont’d)
3.1 Judgements made in applying accounting policies
In the process of applying the Group’s accounting policies, management has made the following judgements, apart from those involving estimations, which has the most signifi cant effect on the amounts recognised in the fi nancial statements:
• Income taxes
The Group has exposure to income taxes in numerous jurisdictions. Signifi cant judgement is involved in determining the Group-wide provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for expected tax issues based on estimates of whether additional taxes will be due. Where the fi nal tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the fi nancial period in which such determination is made. The carrying amount of the Group’s income tax payables at 30 June 2009 was $4,444,909 (2008: $5,451,610). The carrying amount of the Group’s deferred tax liabilities at 30 June 2009 was $3,410,967 (2008: $2,619,051).
3.2 Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a signifi cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fi nancial year are discussed below:
(a) Depreciation of property, plant and equipment
Property, plant and equipment are depreciated on a straight-line basis over their estimated economic useful lives. Management estimates the useful lives of these assets to be within 3 to 50 years. The carrying amount of the Group’s property, plant and equipment at 30 June 2009 was $56,381,971 (2008: $42,146,534). Changes in the expected level of usage and technological developments could impact the economic useful lives of these assets, therefore future depreciation charges could be revised.
(b) Construction contracts
The Group recognises contract revenue and contract costs using the percentage of completion method. Signifi cant judgement is required in determining the total contract costs which affect the determination of the percentage of completion. Total contract revenue also includes estimation of variation works that are recoverable from customers. In making judgement, the Group evaluates by relying on the work of specialists.
64
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
3. Signifi cant accounting judgements and estimates (cont’d)
3.2 Key sources of estimation uncertainty (cont’d)
(c) Impairment of non-fi nancial assets
The Group assesses whether there are any indicators of impairment for all non-fi nancial assets at each reporting date. Intangibles are tested for impairment annually and at other times when such indicators exist. Other non-fi nancial assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable.
When value in use calculations are undertaken, management must estimate the expected future cash fl ows from the asset or cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash fl ows.
(d) Impairment of loans and receivables
The Group assesses at each balance sheet date whether there is any objective evidence that a fi nancial asset is impaired. To determine whether there is objective evidence of impairment, the Group considers factors such as the probability of insolvency or signifi cant fi nancial diffi culties of the debtor and default or signifi cant delay in payments.
Where there is objective evidence of impairment, the amount and timing of future cash fl ows are estimated based on historical loss experience for assets with similar credit risk characteristics. The carrying amount of the Group’s loans and receivables at the balance sheet date is disclosed in Notes 18 and 19 to the fi nancial statements.
4. Revenue
Group 2009 2008
$ $
Contract revenue and manpower supply 439,557,501 313,911,068
Revenue from heat treatment works 177,191 198,127
Sales of goods and services 744,034 538,551
440,478,726 314,647,746
65
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
5. Other operating income
Group 2009 2008
$ $
Gain on disposal of property, plant and equipment 42,589 54,741
Insurance claims 128,873 96,677
Interest income from fi xed deposit 316,721 795,486
Others 70,010 58,300
Project incentives – 898,295
Rental income from equipment 959,611 –
Sundry income 2,256,784 893,734
Write back of provision of doubtful debts - trade 48,162 293,169
Write back of provision of doubtful debts - non-trade – 108,481
3,822,750 3,198,883
6. Finance expenses
Group 2009 2008
$ $
Bank charges 278,467 714,287
Hire purchase interest expense 15,454 29,180
Interest expense on loans and trust receipts 43,259 5,455
Interest expense on bank overdrafts 29 –
337,209 748,922
66
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
7. Profi t before tax
Profi t before tax is stated after charging:
Group 2009 2008
$ $
Allowance for doubtful debts – trade 997,052 35,104
Amortisation of land use rights 24,606 22,725
Bad debt written off – 5,746
Central Provident Fund contributions 4,234,129 4,030,023
Depreciation 7,387,845 5,809,352
Exchange loss, net 448,480 869,400
Loss on disposal of property, plant and equipment 152,316 –
Lease rental of offi ce equipment 92,193 74,030
Non audit services fees 27,063 26,124
Other short term employee benefi ts 8,561,289 4,157,128
Wages, salaries, bonuses 114,303,404 76,425,695
8. Tax expense
Group 2009 2008
$ $
Current tax 4,664,166 5,859,124
Income tax – under/(over) provision in respect of prior year 183,297 (6,249)
Deferred tax – current year 778,124 698,182
Deferred tax – adjustment arising from change in tax rate (145,503) –
Deferred tax – under provision in respect of prior year 159,517 8,520
5,639,601 6,559,577
67
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
8. Tax expense (cont’d)
A reconciliation between the tax expense and product of accounting profi t multiplied by the applicable tax rate for the years ended 30 June 2009 and 2008 is as follows:
Group 2009 2008
$ $
Profi t before tax 30,185,560 33,564,252
Tax at statutory tax rate of 17% (2008: 18%) 5,131,545 6,041,565
Adjustments:
Expenses not deductible for tax purposes 1,415,492 939,659
Non taxable gain (665,739) (328,583)
Differences in tax rate (295,771) (64,809)
Benefi ts from previously unrecognised tax losses (46,322) –
Under provision of income tax in respect of prior year 342,814 2,271
Effects of changes in tax rate (145,503) –
Tax exemption (104,351) (45,097)
Others 7,436 14,571
Income tax expense recognised in the income statement 5,639,601 6,559,577
The statutory income tax rate applicable to the Group was reduced to 17% for Year of Assessment 2010 from 18% for Year of Assessment 2009.
The Group has tax losses of approximately $191,000 (2008: $463,000) that are available for offset against future taxable profi ts of the companies in which the losses arose, for which no deferred tax asset is recognised due to uncertainty of its recoverability. The use of these tax losses is subject to the agreement of the tax authorities and compliance with certain provisions of the tax legislation of the respective countries in which the companies operate.
68
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
9.
Prop
erty
, pla
nt a
nd e
quip
men
t
At c
ost
Leas
ehol
d la
nd a
nd
build
ings
Plan
t m
achi
nery
an
d sit
e eq
uipm
ent
Mot
or
vehi
cles
Offi
ce
equi
pmen
t, fu
rnitu
re a
nd
fi ttin
gs, a
nd
reno
vatio
n
Wor
ksho
p,
offi c
e an
d sta
ff qu
arte
rsCo
nstru
ction
in
pro
gres
sTo
tal
$$
$$
$$
$
Gro
upC
ost
At 1
Jul
y 20
0714
,731
,935
31,4
05,7
506,
087,
057
4,98
0,32
546
5,87
516
1,66
257
,832
,604
Cur
renc
y re
alig
nmen
t(5
4,70
5)(1
04,1
67)
(11,
975)
(13,
866)
–
(2,8
08)
(187
,521
)
Add
ition
s2,
611,
878
7,4
46,8
072,
627,
567
3,38
4,43
9–
13
9,08
316
,209
,774
Dis
posa
ls–
(353
,063
) (3
65,7
46)
(584
,117
)–
–
(1
,302
,926
)
At 3
0 Ju
ne 2
008
and
1 Ju
ly 2
008
17,2
89,1
0838
,395
,327
8,33
6,90
37,
766,
781
465,
875
297,
937
72,5
51,9
31
Cur
renc
y re
alig
nmen
t(1
6,34
2)39
3,08
830
,181
22,0
62–
21
,246
450,
235
Add
ition
s4,
975,
162
11,6
12,9
052,
496,
682
1,18
6,55
8–
1,
148,
113
21,4
19,4
20
Recl
assi
fi cat
ion
1,18
4,80
926
,695
(26
,695
) –
–
(1
,184
,809
) –
Dis
posa
ls(2
91,0
00)
(199
,837
)(2
79,4
01)
(320
,867
)–
–
(1
,091
,105
)
At 3
0 Ju
ne 2
009
23,1
41,7
3750
,228
,178
10,5
57,6
708,
654,
534
465,
875
282,
487
93,3
30,4
81
Acc
umul
ated
dep
reci
atio
n
At 1
Jul
y 20
072,
283,
870
16,7
55,1
573,
245,
139
3,59
8,03
965
,310
–
25,9
47,5
15
Cur
renc
y re
alig
nmen
t(9
,352
)(3
3,48
5)(7
,362
)(8
,229
)–
–
(5
8,42
8)
Cha
rge
for
the
year
987,
764
2,52
3,43
475
8,18
21,
515,
726
24,2
46–
5,
809,
352
Dis
posa
ls–
(3
53,0
53)
(356
,795
)(5
83,1
94)
–
–
(1,2
93,0
42)
At 3
0 Ju
ne 2
008
and
1 Ju
ly 2
008
3,26
2,28
218
,892
,053
3,63
9,16
44,
522,
342
89,5
56–
30
,405
,397
Cur
renc
y re
alig
nmen
t(3
,229
)54
,977
4,39
93,
656
–
–
59,8
03
Cha
rge
for
the
year
1,09
4,55
63,
426,
502
1,02
7,88
61,
814,
570
24,3
31–
7,
387,
845
Recl
assi
fi cat
ion
–
13,5
24
(13
,524
) –
–
–
–
Dis
posa
ls(1
29,3
33)
(185
,986
)(2
74,4
35)
(314
,781
)–
–
(9
04,5
35)
At 3
0 Ju
ne 2
009
4,22
4,27
622
,201
,070
4,38
3,49
06,
025,
787
113,
887
–
36,9
48,5
10
Net
boo
k va
lue
As
at 3
0 Ju
ne 2
008
14,0
26,8
2619
,503
,274
4,69
7,73
93,
244,
439
376,
319
297,
937
42,1
46,5
34
As
at 3
0 Ju
ne 2
009
18,9
17,4
6128
,027
,108
6,17
4,18
02,
628,
747
351,
988
282,
487
56,3
81,9
71
69
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
9. Property, plant and equipment (cont’d)
At cost
Leasehold land
and buildings
Machinery and site
equipmentMotor
vehicles
Offi ce equipment, furniture
and fi ttings,and
renovation Total$ $ $ $ $
CompanyCost
At 1 July 2007 10,328,467 24,546,621 5,253,550 3,111,430 43,240,068
Additions 2,176,877 5,349,690 2,328,951 2,015,391 11,870,909
Disposals – (344,063) (332,893) (468,933) (1,145,889)
At 30 June 2008 and 1 July 2008 12,505,344 29,552,248 7,249,608 4,657,888 53,965,088
Additions 3,000,000 4,978,455 2,271,783 765,467 11,015,705
Disposals (291,000) (140,377) (83,835) (152,759) (667,971)
At 30 June 2009 15,214,344 34,390,326 9,437,556 5,270,596 64,312,822
Accumulated depreciation
At 1 July 2007 998,785 14,680,087 2,828,121 2,387,656 20,894,649
Charge for the year 764,769 1,968,987 640,433 1,108,926 4,483,115
Disposals – (344,053) (332,883) (468,249) (1,145,185)
At 30 June 2008 and 1 July 2008 1,763,554 16,305,021 3,135,671 3,028,333 24,232,579
Charge for the year 919,936 2,395,052 867,467 1,208,462 5,390,917
Disposals (129,333) (138,568) (83,833) (148,534) (500,268)
At 30 June 2009 2,554,157 18,561,505 3,919,305 4,088,261 29,123,228
Net book value
As at 30 June 2008 10,741,790 13,247,227 4,113,937 1,629,555 29,732,509
As at 30 June 2009 12,660,187 15,828,821 5,518,251 1,182,335 35,189,594
Included in property, plant and equipment of the Group are motor vehicles with a net book value of $126,447 as at 30 June 2009 (2008: $202,232) and plant and machinery and site equipment with a net book value of $432,713 as at 30 June 2009 (2008: $470,288) acquired under hire purchase.
70
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
10. Available-for-sale quoted investments
Group Company2009 2008 2009 2008
$ $ $ $
At beginning of year, at fair value 195,576 378,268 195,576 378,268
Fair value losses taken to equity (65,260) (182,692) (65,260) (182,692)
At end of year 130,316 195,576 130,316 195,576
11. Investment in subsidiaries
Company2009 2008
$ $
Shares, at cost 12,547,575 12,876,695
Impairment losses (2,870,957) (2,870,957)
Carrying amount of investment in subsidiaries 9,676,618 10,005,738
Name of subsidiaries
Country of incorporation and place of
business Principal activities
Effective percentage of equity held
2009 2008% %
Held by the Company
Audex Pte. Ltd. (1) Singapore Engineering, Procurement, Construction and project management services
80 92
Huizhou Tianxin Petrochemical Engineering Co., Ltd (HTPE) (2)
People’s Republic of
China
Engineering design, Procurement, Construction and maintenance services
60 60
IT Re-Engineering Pte. Ltd. (ITR) (1) Singapore Information technology and consultancy services
100 100
PEC Construction Equipment Leasing Company (Huizhou) Limited (PECCEL) (2)
People’s Republic of
China
Heavy machineries and equipment leasing services
100 100
71
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
11. Investment in subsidiaries (cont’d)
Name of subsidiaries
Country of incorporation and place of
business Principal activities
Effective percentage of equity held
2009 2008% %
Held by the Company
PEC International Investments Pte. Ltd. (PECI) (1)
Singapore Investment company 100 100
PEC (Malaysia) Sdn. Bhd.(PECM) (7)
Malaysia Civil, mechanical and electrical engineering project services
100 100
PEC Technology Consultancy Services (Huizhou) Ltd. (PEC Huizhou) (2)
People’s Republic of
China
Engineering technology, economic environmental and health consultancy services
100 100
Plant Engineering Services Pte. Ltd. (PES) (1)
Singapore Engineering, Procurement, Construction and management services
60 60
Plant General Services Pte. Ltd. (1) Singapore Blasting and painting, scaffolding, insulation services
100 –
PT PEC Anugerah Sejahtera(PTPEC) (3)
Indonesia Fabrication and engineering works 75 75
Testing Inspection & Solution Pte. Ltd. (1)
Singapore Heat treatment services 100 100
72
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
11. Investment in subsidiaries (cont’d)
Name of subsidiaries
Country of incorporation and place of
business Principal activities
Effective percentage of equity held
2009 2008% %
Held through a subsidiary
Audex (Shanghai) Co, Ltd. (4) People’s Republic of
China
Project management 80 92
Audex Fujairah LL FZE (5) UAE Engineering, procurement, construction and project management services
80 92
Audex Engineering (Vietnam) Co. Ltd (6)
Vietnam Engineering, procurement, construction and project management services
80 92
(1) Audited by Ernst & Young LLP, Singapore
(2) Financial year end is 31 December. Audited by Huizhou Fangzheng Certifi ed Public Accountants for the year ended 31 December 2008
(3) Not required to be audited by the law of its country of incorporation
(4) Financial year end is 31 December. Audited by Shanghai Xing Zhong Certifi ed Public Accountants for the year ended 31 December 2008.
(5) Audited by Ernst & Young, Dubai
(6) Audited by Auditing and Consulting Co
(7) Audited by Ernst & Young, Malaysia
73
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
12. Investment in joint venture
Group2009 2008
$ $
Unquoted shares, at cost 50,000 50,000
Share of post acquisition reserves 88,756 61,282
138,756 111,282
Name
Country of incorporation and place of
business Principal activities
Effective percentage of equity held by
Group2009 2008
% %
Held through a subsidiary
CTS (Far East) Pte. Ltd. (1) Singapore Sale and distribution of storage tanks related equipment
40 46
(1) Audited by Ernst & Young LLP, Singapore
13. Investment in associates
Group Company2009 2008 2009 2008
$ $ $ $
Unquoted shares, at cost 1,915,085 1,915,085 220,000 220,000
Share of post-acquisition reserves (1,033,853) (472,700) – –
Carrying amount of investments 881,232 1,442,385 220,000 220,000
74
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
13. Investment in associates (cont’d)
Name of associates
Country of incorporation and place of
business Principal activities
Effective percentage of equity held by
Group2009 2008
% %
Held by the Company
Plant Electrical InstrumentationPte. Ltd. (PEI) (1)
Singapore Engineering services and installation of electrical and scientifi c instruments
44 44
Held through subsidiaries
PECI-Thai Company Limited(PECI-Thai) (2)
Thailand Engineering, Procurement, Construction and maintenance services
48 49
Delta Aliran (M) Sdn. Bhd.* Malaysia Civil, mechanical and electrical engineering project services
– 24
Held through an associate
Plant Maintenance & Construction (Thailand) Co., Ltd. (PMC) (2)
Thailand Engineering, Procurement, Construction and management services
24 24
* Dissolved and deregistered with effect from 25 June 2009 (1) Financial year end is 31 March. Audited by PricewaterhouseCoopers, Singapore (2) Audited by EX-CL Consulting Business Company Limited
75
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
13. Investment in associates (cont’d)
The summarised fi nancial information of the associates is as follows:
Group2009 2008
$ $
Assets and liabilities:Current assets 10,599,671 9,526,365
Non-current assets 2,482,793 2,894,983
Total assets 13,082,464 12,421,348
Current liabilities 7,612,895 9,498,205
Non-current liabilities 4,515,135 854,316
Total liabilities 12,128,030 10,352,521
Results:Revenue 17,286,546 29,954,373
(Loss)/profi t for the year (1,150,504) 864,215
14. Intangibles
Intangibles comprise the following:
Group Company2009 2008 2009 2008
$ $ $ $
Club membershipsAt beginning of year 234,500 192,500 234,500 192,500
Additions during the year 41,500 42,000 41,500 42,000
At end of year 276,000 234,500 276,000 234,500
Club memberships are carried at cost less any accumulated impairment loss. The transferable memberships in Palm Resort Golf & Country Club, Jurong Country Club, Raffl es Country Club, Warren Golf & Country Club, Poresia Country Club and Orchid Country Club are registered in the name of directors and senior managers in trust for the Company.
76
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
15. Land use rights
Group2009 2008
$ $
Cost
At beginning of year 1,080,288 1,098,932
Currency realignment 77,031 (18,644)
Addition during the year 23,796 –
At end of year 1,181,115 1,080,288
Accumulated amortisation
At beginning of year 49,277 26,552
Charge for the year 24,606 22,725
Currency realignment 3,329 –
At end of year 77,212 49,277
Net book value
At end of year 1,103,903 1,031,011
Land use rights are carried at cost less accumulated amortisation. Amortisation is charged to the income statement on a straight line basis over the period of the rights, which ranges from 47.5 to 69.0 years.
16. Inventories
Group2009 2008
$ $
Finished goods at lower of cost and net realisable value 28,127 20,964
77
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
17. Contract work-in-progress (net of progress billings)
Group Company2009 2008 2009 2008
$ $ $ $
Contract work in progress
Project cost and attributable profi ts 430,615,951 247,232,019 161,536,196 123,096,231
Less : Progress billings (372,657,591) (232,192,447) (130,429,660) (88,375,313)
Less : Provision for foreseeable loss (1,273,296) – (1,273,296) –
56,685,064 15,039,572 29,833,240 34,720,918
18. Trade receivables
Group Company2009 2008 2009 2008
$ $ $ $
Trade receivables
- external parties 39,414,400 55,946,236 26,610,866 37,334,530
- associates 2,188,666 9,445,640 328,368 324,932
- related parties 7,673 1,455,939 963 963
- subsidiaries – – 1,983,445 708,785
41,610,739 66,847,815 28,923,642 38,369,210
Allowance for doubtful debts
- external parties (18,606) (35,104) (12,558) (32,408)
- associates (1,267,468) (302,080) (306,993) (302,080)
- subsidiaries – – (455,520) (455,520)
40,324,665 66,510,631 28,148,571 37,579,202
Trade receivables are non-interest bearing and are generally on 30 - 90 days’ terms. They are recognised at their original invoice amounts which represents their fair values on initial recognition. Related parties refer to companies held by a majority corporate shareholder of the Company and a corporate shareholder of an associate.
78
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
18. Trade receivables (cont’d)
Foreign currency denominated trade receivables are denominated in the following currencies:
Group Company2009 2008 2009 2008
$ $ $ $
Arab Emirates Dirham 2,099,762 3,178,897 – –
Chinese Yuan 1,169,124 841,150 – –
Malaysian Ringgit 13,742 99,488 – –
Thai Baht 108,619 104,749 108,619 104,749
US Dollar 71,003 15,106,555 17,095 –
3,462,250 19,330,839 125,714 104,749
Receivables that are past due but not impaired
The Group has trade receivables amounting to $7,591,989 (2008: $7,190,659) that are past due at the balance sheet date but not impaired. These receivables are unsecured and the analysis of their aging at the balance sheet date is as follows:
Group2009 2008
$ $
Trade receivables past due:
Lesser than 30 days 5,046,947 5,694,934
31 to 60 days 1,726,728 741,883
61 to 90 days 55,625 187,317
More than 90 days 762,689 566,525
7,591,989 7,190,659
79
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
18. Trade receivables (cont’d)
Receivables that are impaired
The Group’s trade receivables that are impaired at the balance sheet date and the movement of the allowance accounts used to record the impairment are as follows:
Individually impaired
Group2009 2008
$ $
Trade receivables – nominal amounts 1,286,074 337,184
Less: Allowance for impairment (1,286,074) (337,184)
– –
Movement in allowance accounts:
At 1 July 337,184 737,223
Charge for the year 997,052 35,104
Written off – (141,974)
Written back (48,162) (293,169)
At 30 June 1,286,074 337,184
Trade receivables that are individually determined to be impaired at the balance sheet date relate to debtors that are in signifi cant fi nancial diffi culties and have defaulted on payments. These receivables are not secured by any collateral or credit enhancements.
19. Other receivables, deposits and prepayments
Group Company2009 2008 2009 2008
$ $ $ $
Advances 901,112 2,515,317 558,544 559,735
Other receivables 685,769 6,916,440 792,938 655,781
Prepayments 1,751,378 1,453,335 1,498,350 606,414
Sundry deposits 2,193,315 1,795,068 1,700,230 1,535,711
5,531,574 12,680,160 4,550,062 3,357,641 Included in other receivables is an amount of $541,241 (2008: $6,725,451) due from a business partner
which is unsecured, repayable on demand and is at an interest rate of 5.3% (2008: 5.3%) per annum.
80
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
20. Derivative fi nancial instruments
Contract notional amount Assets Liabilities
$ $ $
Group2009Forward currency contract 2,482,050 47,695 –
Flexi forward currency contract 2,909,365 – (1,398)
Currency option contract 2,760,000 197 –
47,892 (1,398)
2008Forward currency contract 1,264,000 – (27,380)
Flexi forward currency contract 2,727,200 – (5,160)
Currency option contract 2,760,000 423,787 –
423,787 (32,540)
The Group does not apply hedge accounting.
The above derivative fi nancial instruments are used to hedge the Group’s sales and purchases denominated in United States Dollar, Arab Emirates Dirham and Euro.
21. Loan due from an associate
The loan to an associate is unsecured, repayable on demand and is at an interest rate of 5.5% (2008: Nil) per annum.
81
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
22. Cash and cash equivalents
Cash and cash equivalents comprise the following amounts:
Group Company2009 2008 2009 2008
$ $ $ $
Cash and bank balances 26,463,065 30,825,348 14,512,663 13,640,438
Fixed deposits 25,951,452 18,118,708 20,062,697 11,890,780
Cash and cash equivalents 52,414,517 48,944,056 34,575,360 25,531,218
Less : Fixed deposits pledged to the bank for bank facilities (2,050,000) (1,000,000) (2,050,000) (1,000,000)
50,364,517 47,944,056 32,525,360 24,531,218
The weighted average effective interest rate of fi xed deposits ranges from approximately 0.03% to 17.00% (2008: 0.50% to 9.28%) per annum. The fi xed deposits mature within 3 months (2008: within 3 months) from the fi nancial year end.
Foreign currency denominated cash and cash equivalents are denominated in the following currencies :
Group Company2009 2008 2009 2008
$ $ $ $
Chinese Yuan 2,521,850 2,990,803 – –
Euro 512,205 667,484 – –
Malaysian Ringgit 1,729,745 3,256,344 894,697 2,738,258
Sri Lanka Rupee 13,951 17,823 – –
United States Dollar 8,387,240 13,125,088 810,576 3,720,329
13,164,991 20,057,542 1,705,273 6,458,587
82
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
23. Trade and other payables
Trade payables are non-interest bearing and are normally settled on 60-day terms. Trade payables to subsidiaries, associates and related parties are non-interest bearing and are repayable on demand.
Group Company2009 2008 2009 2008
$ $ $ $
Trade and other payables (current):Other payables and accruals (Note 24) 49,948,726 47,348,682 39,743,130 37,401,437
Trade payables
- external parties 31,381,296 27,341,922 18,871,266 19,360,761
- associates 28,449 273,379 28,449 260,108
- related parties 525,883 3,756,179 66,843 46,575
- subsidiaries – – 437,420 2,239,954
Total fi nancial liabilities carried at amortised cost 81,884,354 78,720,162 59,147,108 59,308,835
Trade and other payables
These amounts are non-interest bearing. Trade payables are normally settled on 60-day terms.
Foreign currency denominated trade payables are denominated in the following currencies:
Group Company2009 2008 2009 2008
$ $ $ $
Chinese Yuan 77,949 – – –
Euro 21,984 533,247 – –
Malaysian Ringgit 148,360 57,071 – –
US Dollar 2,491,544 5,675,890 7,217 182,191
Arab Emirates Dirham 4,494,475 – – –
7,234,312 6,266,208 7,217 182,191
83
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
24. Other payables and accruals
Group Company2009 2008 2009 2008
$ $ $ $
Accrued operating expenses 26,072,349 18,068,112 22,783,974 15,108,589
Accrued salaries and bonuses 11,954,804 18,704,521 7,742,250 14,178,785
Directors’ fees 74,000 57,464 36,000 36,000
Other payables 2,828,218 2,040,122 1,873,650 594,053
Profi t participation incentives 6,364,212 6,102,132 5,595,062 5,952,132
Provision for unutilised leave 1,554,143 1,275,331 1,046,194 865,878
Provision for reinstatement cost 1,101,000 1,101,000 666,000 666,000
49,948,726 47,348,682 39,743,130 37,401,437
Provision for reinstatement cost refers to the estimated cost of dismantling and reinstating the leasehold properties as at the end of the lease term.
25. Non-current borrowings, secured
Group Company2009 2008 2009 2008
$ $ $ $
Hire purchase creditors 146,446 372,964 13,183 30,133
Less: Due within 12 months (133,329) (232,168) (13,183) (22,600)
Due after 12 months 13,117 140,796 – 7,533
84
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
25. Non-current borrowings, secured (cont’d)
Hire purchase creditors
Finance leases bear interest of between 4.5% to 7.1% (2008: 4.5% to 7.1%) per annum and are secured by rights to the leased fi xed assets (Note 9). Future minimum lease payments under the fi nance leases together with the present value of the net minimum lease payments are as follows:
Minimumlease
payments
Present value of minimum
lease payments
Minimumlease
payments
Present value of minimum
lease payments
2009 2009 2008 2008$ $ $ $
GroupNot later than one year 138,097 133,329 248,272 232,168
Later than one year but not more than fi ve years 13,289 13,117 145,087 140,796
Total minimum lease payments 151,386 146,446 393,359 372,964
Less amounts representing fi nance charges (4,940) – (20,395) –
Present value of minimum lease payments 146,446 146,446 372,964 372,964
Finance leases bear interest at 4.5% (2008: 4.5%) per annum and are secured by the rights to leased fi xed assets (Note 9). Future minimum lease payments under the fi nance lease together with the present value of the net minimum lease payments are as follows:
Minimumlease
payments
Present value of minimum
lease payments
Minimumlease
payments
Present value of minimum
lease payments
2009 2009 2008 2008$ $ $ $
CompanyNot later than one year 14,699 13,183 25,199 22,600
Later than one year but not more than fi ve years – – 8,400 7,533
Total minimum lease payments 14,699 13,183 33,599 30,133
Less amounts representing fi nance charges (1,516) – (3,466) –
Present value of minimum lease payments 13,183 13,183 30,133 30,133
85
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
26. Deferred tax liabilities
Deferred income tax as at 30 June relates to the following:
Group Company2009 2008 2009 2008
$ $ $ $
Deferred tax liabilitiesDifferences in depreciation 3,410,967 2,619,051 3,093,984 2,301,846
An analysis of the deferred taxes is as follows:
At beginning of year 2,619,051 1,912,349 2,301,846 1,703,326
Movements in deferred taxes
- current year 778,124 698,182 760,501 598,520
- arising from change in tax rate (145,503) – (127,880) –
- underprovision in respect of prior year 159,517 8,520 159,517 –
- currency realignment (222) – – –
At end of year 3,410,967 2,619,051 3,093,984 2,301,846
27. Share capital
Group and Company2009 2008
No. of shares $ No. of shares $
Issued and fully paid :
At beginning of year 5,000,000 5,000,000 5,000,000 5,000,000
Issuance of bonus shares 20,000,000 20,000,000 – –
Sub-division 150,000,000 – – –
At end of year 175,000,000 25,000,000 5,000,000 5,000,000
The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restrictions.
86
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
27. Share capital (cont’d)
On 25 June 2009, the shareholders proposed the resolutions to approve the issuance of 20,000,000 bonus shares by the sub-division of every one ordinary share of the Company into 7 shares.
On 6 August 2009, 63,000,000 new ordinary shares were issued to the Public at $0.40 per share pursuant to the Company’s Initial Public Offering.
On 26 August 2009, DBS Bank Ltd exercised the over-allotment option of 12,600,000 ordinary shares of the Company.
28. Statutory reserves
In accordance with laws and regulations in the PRC, the Group’s subsidiaries established in the PRC are required to appropriate not less than 10% of its profi t after taxation to the reserve fund until the reserve balance reaches 50% of the registered capital. Accordingly, a portion of the profi ts has been transferred to the statutory reserve.
The statutory reserve fund is not free for distribution as dividends but it can be used to offset losses or be capitalised as capital of the subsidiaries.
29. Fair value reserves
Fair value adjustment reserve represents the cumulative fair value changes, net of tax, of available-for-sale fi nancial assets until they are disposed of or impaired.
30. Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange differences arising from the translation of the fi nancial statements of the foreign subsidiaries and associates whose functional currencies are different from that of the Group’s presentation currency.
87
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
31. Related party disclosures
Related parties refer to companies held by a majority corporate shareholder of the Company and a corporate shareholder of an associate.
(a) Sale and purchase of goods and services
In addition to those related party information disclosed elsewhere in the fi nancial statements, the following signifi cant transactions between the Group and related parties took place during the year on terms agreed between the parties:
Group2009 2008
$ $
(i) Concluded with related parties :
Revenue from sale of information systems (11,578) (12,779)
Revenue from engineering works (1,445,095) (3,397,034)
Consultancy fees – 50,000
Bank charges 1,916 3,820
Offi ce rental expenses 166,342 125,600
Utilities 38,101 –
(ii) Concluded with associates/joint venture:
Revenue from IT support services (88,261) (31,635)
Revenue from manpower supply and engineering works (2,577,586) (20,721,424)
Revenue from office maintenance and administrative charges (2,876) (6,597)
Purchase of materials 6,309,659 5,307,456
Subcontractors charges and manpower charges 2,670,782 2,546,992
Temporary facilities – 5,606
Recruitment 530,092 –
88
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
31. Related party disclosures
(b) Compensation of key management personnel
Group2009 2008
$ $
Directors’ fees 65,080 57,464
Salaries and bonuses 2,044,435 2,193,363
Short-term employee benefi ts 104,109 25,641
Central Provident Fund contributions 98,997 120,614
Profi t participation incentive 6,307,497 6,102,132
Total compensation paid to key management personnel 8,620,118 8,499,214
Comprise amounts paid to
- Directors of the Company 5,729,489 6,179,537
- Other key management personnel 2,890,629 2,319,677
8,620,118 8,499,214
32. Commitments and contingencies
Group Company2009 2008 2009 2008
$ $ $ $
(a) Capital commitments
Capital commitments in respect of purchase of property, plant and equipment 1,700,233 2,418,000 1,640,000 2,418,000
89
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
32. Commitments and contingencies (cont’d)
(b) Operating lease commitments
The Group and the Company have entered into commercial leases for properties as lessee. Operating lease payments recognised in the consolidated income statement during the year amounted to $8,739,520 (2008: $5,157,743).
Future minimum lease payments payable under non-cancellable operating leases as at 30 June are as follows:
Group Company2009 2008 2009 2008
$ $ $ $
Within one year 7,537,206 4,449,014 6,606,856 3,502,113
After one year but not more than fi ve years 4,612,250 1,811,605 4,225,750 1,380,365
More than fi ve years 4,815,676 4,517,284 3,498,826 3,090,571
16,965,132 10,777,903 14,331,432 7,973,049
(a) The Group has corporate guarantees amounting to $76,920,175 (2008: $70,896,035).
(b) The Group has given indemnity to banks in connection with the issuance of performance bond guarantees of $19,009,761 as at 30 June 2009 (2008: $14,592,677) in favour of third parties in respect of the Group’s business.
(c) The Group has given indemnity to banks in connection with the issuance of immigration bond guarantees of $21,965,000 as at 30 June 2009 (2008: $15,825,000) in favour of a third party in respect of the Group’s business.
(d) The Group has an open letter of credit and trade facilities of $15,787,417 as at 30 June 2009 (2008: $22,842,021) in favour of a third party in respect of the Group’s business.
33. Financial risk management objectives and policies
The Group and the Company is exposed to fi nancial risks arising from its operations and the use of fi nancial instruments. The key fi nancial risks include credit risk, liquidity risk and foreign currency risk. The Board of directors reviews and agrees policies and procedures for the management of these risks. It is, and has been throughout the current and previous fi nancial year the Group’s policy that no derivatives shall be undertaken except for the use of hedging instruments where appropriate and cost-effi cient. The Group and the Company does not apply hedge accounting.
90
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
33. Financial risk management objectives and policies (cont’d)
The following sections provide details regarding the Group’s and Company’s exposure to the above-mentioned fi nancial risks and the objectives, policies and processes for the management of these risks.
(a) Credit risk
Credit risk is the risk of loss that may arise on outstanding fi nancial instruments should a counterparty default on its obligations. The Group’s and the Company’s exposure to credit risk arises primarily from trade and other receivables. For other fi nancial assets (including available for sale investment, cash and cash equivalents and derivatives), the Group and the Company minimises credit risk by dealing exclusively with high credit rating counterparties.
The Group’s objective is to seek continual revenue growth while minimising losses incurred due to increased credit risk exposure. The Group trades only with recognised and creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verifi cation procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not signifi cant.
Exposure to credit risk
At the balance sheet date, the Group’s and the Company’s maximum exposure to credit risk is represented by:
- the carrying amount of each class of fi nancial assets recognised in the balance sheets, including derivatives with positive fair values; and
Credit risk concentration profi le
With the exception of a trade receivable owing by one customer, there are no signifi cant concentrations of credit risk within the Group or Company.
Financial assets that are neither past due nor impaired
Trade and other receivables that are neither past due nor impaired are creditworthy debtors with good payment record with the Group. Cash and cash equivalents, available for sale investments and derivatives that are neither past due nor impaired are placed with or entered into with reputable fi nancial institutions or companies with high credit ratings and no history of default.
Financial assets that are either past due or impaired
Information regarding fi nancial assets that are either past due or impaired is disclosed in Note 18 (Trade receivables).
91
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
33. Financial risk management objectives and policies (cont’d)
(b) Liquidity risk
Liquidity risk is the risk that the Group or the Company will encounter diffi culty in meeting fi nancial 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 fi nancial assets and liabilities. The Group’s and the Company’s objective is to maintain a balance between continuity of funding and fl exibility through the use of stand-by credit facilities.
The Group and Company manages its liquidity risk by maintaining suffi cient cash and marketable securities to enable them to meet their normal operating commitments.
The table below summarises the maturity profi le of the Group’s and the Company’s fi nancial liabilities at the balance sheet date based on contractual undiscounted payments.
1 year or less 1 to 5 years Over 5 years TotalGroup $ $ $ $
2009Hire purchase creditors 138,097 13,289 – 151,386
Other payables and accruals 49,948,726 – – 49,948,726
Derivative fi nancial liabilities 1,398 – – 1,398
Trade payables
- external parties 31,381,296 – – 31,381,296
- associates 28,449 – – 28,449
- related parties 525,883 – – 525,883
- dividend payable 8,000,000 – – 8,000,000
90,023,849 13,289 – 90,037,138
2008Amount due to minority interest 396,542 – – 396,542
Short-term fi nancing loan 1,646,526 – – 1,646,526
Derivative fi nancial liabilities 32,540 – – 32,540
Hire purchase creditors 248,272 145,087 – 393,359
Other payables and accruals 47,348,682 – – 47,348,682
Trade payables
- external parties 27,341,922 – – 27,341,922
- associates 273,379 – – 273,379
- related parties 3,756,179 – – 3,756,179
81,044,042 145,087 – 81,189,129
92
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
33. Financial risk management objectives and policies (cont’d)
(b) Liquidity risk (cont’d)
1 year or less 1 to 5 years Over 5 years TotalCompany $ $ $ $
2009Hire purchase creditors 14,699 – – 14,699
Other payables and accruals 39,743,130 – – 39,743,130
Trade payables
- external parties 18,871,266 – – 18,871,266
- associates 28,449 – – 28,449
- related parties 66,843 – – 66,843
- subsidiaries 437,420 – – 437,420
- dividend payable 8,000,000 – – 8,000,000
67,161,807 – 67,161,807
2008Hire purchase creditors 25,199 8,400 – 33,599
Other payables and accruals 37,401,437 – – 37,401,437
Trade payables
- external parties 19,360,761 – – 19,360,761
- associates 260,108 – – 260,108
- related parties 46,575 – – 46,575
- subsidiaries 2,239,954 – – 2,239,954
59,334,034 8,400 – 59,342,434
93
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
33. Financial risk management objectives and policies (cont’d)
(c) Foreign currency risk
The Group and the Company hold cash and cash equivalents, trade receivables and trade payables denominated in foreign currencies for working capital purposes. The Group is exposed to currency translation risk arising mainly from its net investments in foreign operations, including Malaysia and the People’s Republic of China (“PRC”). The Group’s net investments are not hedged as currency positions in ringgit and RMB are considered to be long-term in nature.
Sensitivity analysis for foreign currency risk
The following table demonstrates the sensitivity to a reasonably possible change in the USD, CNY, AUD and MYR exchange rates (against SGD), with all other variables held constant, on the Group’s profi t net of tax and equity as at balance sheet date.
Group2009 2008$’000 $’000
USD - strengthened 3% (2008: 3%) +275 +624
- weakened 3% (2008: 3%) -275 -508
CNY - strengthened 3% (2008: 3%) +90 +94
- weakened 3% (2008: 3%) -90 -94
AUD - strengthened 3% (2008: 3%) +39 +70
- weakened 3% (2008: 3%) -39 -25
MYR - strengthened 3% (2008: 3%) +40 +81
- weakened 3% (2008: 3%) -40 -81
94
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
34. Financial instruments
Fair values
The fair value of a fi nancial instrument is the amount at which the instrument could be exchanged or settled between knowledgeable and willing parties in an arm’s length transaction, other than in a forced or liquidation sale.
Financial instruments whose carrying amount approximate fair value
Management has determined that the carrying amounts of cash and cash equivalents, trade and other receivables (including amounts receivable from associates and related parties), loan receivable from an associate, trade and other payables (including amounts payable to associates. related parties and minority interests) and dividend payable based on their notional amounts, reasonably approximate their fair values because these are mostly short-term in nature or repayable on demand.
Methods and assumptions used to determine fair values
The methods and assumptions used by management to determine fair values of fi nancial instruments other than those whose carrying amounts reasonably approximate their fair values as mentioned earlier, are as follows:
Financial assets Methods and assumptions
Available-for-sale investments (quoted) Fair value has been determined based on published market prices at the balance sheet date without factoring in transaction costs.
Derivative fi nancial investment Fair value is calculated by reference to forward exchange contracts with similar maturity profi les.
95
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
35. Capital management The Group’s objectives when managing capital are:
(1) to safeguard the entity’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefi ts for other stakeholders;
(2) to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.
The Group aims to obtain an optimal capital structure by balancing capital effi ciency and fi nancial fl exibility. The Group manages its capital structure in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders or issue new shares or raise funds through the debt market.
As disclosed in Note 28, subsidiaries of the Group are required by the Foreign Enterprise Law of the PRC to contribute to and maintain a non-distributable statutory reserve fund whose utilisation is subject to approval by the relevant PRC authorities. This externally imposed capital requirement has been complied with by the above-mentioned subsidiaries for the relevant fi nancial years.
Management monitors capital based on a gearing ratio. The gearing ratio is defi ned as the sum of total external borrowings divided by the sum of total capital employed. Total borrowings comprises hire purchase, term loan and overdraft. Total capital employed is calculated as equity plus borrowings.
Group Company2009 2008 2009 2008
$ $ $ $
Total borrowings 146,446 2,011,084 13,183 30,133
Total equity 104,974,806 95,230,223 72,276,045 76,928,861
Total capital employed 105,121,252 97,241,307 72,289,228 76,958,994
Gearing ratio 0.14% 2.07% 0.02% 0.04%
96
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
36. Segmental information
Reporting format
The primary segment reporting format is determined to be business segments as the Group’s risks and rates of return are affected predominantly by differences in the services and projects carried out. Secondary information is reported geographically. The operating businesses are organised and managed separately according to the nature of the projects and services carried out, with each segment representing a strategic business unit that offers different services and serves different markets.
Business segments
The Project works segment relates to provision of engineering, procurement and construction services for certain aspects of a plant project, such as tankage and/or piping work, procurement to the Oil and Gas, Petrol-chemical, Pharmaceutical and Oil and Chemical Terminal industries.
The plant maintenance and related services segment relates to a full discipline of maintenance services provided to the oil and gas, petrochemical, pharmaceutical and oil and chemical terminal industries, usually for a fi xed three to fi ve year term, under which various maintenance services and their relevant rates would be itemised.
The other operations segment relates to services provided through the Company’s subsidiaries whereby heat treatment, information technology services/products and construction equipment leasing are provided. It also relates to construction equipment leasing services provided through the Company’s PRC subsidiary.
For the business of the Group, unallocated assets and liabilities comprised assets and liabilities that are interchangeable amongst segments in the generation of revenue.
Geographical segments
The Group’s geographical segments are based on the operational sites’ geographic location.
Allocation basis and transfer pricing
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprises tax assets and liabilities that cannot be reasonably allocated.
Transfer prices between business segments are set on an arm’s length basis in a manner similar to transactions with third parties. Segment revenue, expenses and results include transfers between business segments. These transfers are eliminated on consolidation.
97
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
36. Segmental information (cont’d)
(a) Business segments
Project works
Plantmaintenance and related
servicesOther
operations Eliminations Total$ $ $ $ $
2008Revenue 200,011,312 113,899,755 736,679 – 314,647,746
Inter-segment sales 4,849,121 2,490,205 8,414,662 (15,753,988) –
Total revenue 204,860,433 116,389,960 9,151,341 (15,753,988) 314,647,746
Results:Segment results 55,564,986 25,151,592 111,825 – 80,828,403
Unallocated expenses (46,936,391)
Finance costs (748,922)
Share of results of associates 359,880
Share of results of joint venture 61,282
Profi t before tax 33,564,252
Tax expense (6,559,577)
Profi t for the year 27,004,675
2009Revenue 332,796,476 106,741,363 940,887 – 440,478,726
Inter-segment sales 10,613,317 2,624,040 2,465,804 (15,703,161) –
Total revenue 343,409,793 109,365,403 3,406,691 (15,703,161) 440,478,726
Results:Segment results 67,208,528 23,968,605 266,195 – 91,443,328
Unallocated expenses (60,386,880)
Finance costs (337,209)
Share of results of associates (561,153)
Share of results of joint venture 27,474
Profi t before tax 30,185,560
Tax expense (5,639,601)
Profi t for the year 24,545,959
98
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
36. Segmental information (cont’d)
(a) Business segments (cont’d)
Project works
Plantmaintenance and related
servicesOther
operations Eliminations Total$ $ $ $ $
2008Assets and liabilities:Segment assets 41,179,847 39,557,219 813,137 – 81,550,203
Investment in joint venture – – 111,282 – 111,282
Investments in associates – – 1,442,385 – 1,442,385
Unallocated assets – – – – 105,676,588
Total assets 41,179,847 39,557,219 2,366,804 – 188,780,458
Segment liabilities (4,393,116) (13,621,973) (36,252) – (18,051,341)
Unallocated liabilities – – – – (71,179,648)
Total liabilities (4,393,116) (13,621,973) (36,252) – (89,230,989)
Other segment information:Capital expenditure:
- Tangible assets – – – – 16,209,774
- Intangible assets – – – – 42,000
Depreciation and amortisation 2,590,538 1,303,418 322,078 – 4,216,034
Unallocated depreciation and amortisation – – – – 1,615,918
99
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
36. Segmental information (cont’d)
(a) Business segments (cont’d)
Project works
Plant maintenance and related
servicesOther
operations Eliminations Total$ $ $ $ $
2009Assets and liabilities:Segment assets 73,777,540 22,571,266 227,832 – 96,576,638
Investment in joint venture – – 881,232 – 881,232
Investments in associates – – 138,756 – 138,756
Unallocated assets – – – – 116,557,606
Total assets 73,777,540 22,571,266 1,247,820 – 214,154,232
Segment liabilities (4,990,390) (9,393,817) (40,500) – (14,424,707)
Unallocated liabilities – – – – (83,463,367)
Total liabilities (4,990,390) (9,393,817) (40,500) – (97,888,074)
Other segment information:Capital expenditure:
- Tangible assets – – – – 21,419,420
- Intangible assets – – – – 41,500
Depreciation and amortisation 2,180,954 1,237,174 372,840 – 3,790,968
Unallocated depreciation and amortisation – – – – 3,621,948
100
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
36. Segmental information (cont’d)
Geographical segments
Singapore Middle East
Asia Pacifi c Region
(other than Singapore) Eliminations Total
$ $ $ $ $
2008Revenue 240,098,836 49,264,300 25,284,610 – 314,647,746
Inter-segment sales 14,789,518 – 964,470 (15,753,988) –
Segment revenue 254,888,354 49,264,300 26,249,080 (15,753,988) 314,647,746
2009Revenue 283,939,831 118,371,938 38,166,957 – 440,478,726
Inter-segment sales 14,919,271 – 783,890 (15,703,161) –
Segment revenue 298,859,102 118,371,938 38,950,847 (15,703,161) 440,478,726
2008Assets and liabilities:Segment assets 160,457,055 1,545,142 25,224,594 – 187,226,791
Investment in associates 1,442,385 – – – 1,442,385
Investment in joint venture 111,282 – – – 111,282
Total assets 162,010,722 1,545,142 25,224,594 – 188,780,458
Segment liabilities (74,157,895) (739,971) (6,262,462) – (81,160,328)
Unallocated liabilities – – – – (8,070,661)
Total liabilities (74,157,895) (739,971) (6,262,462) – (89,230,989)
Other segment information:Capital expenditure:
- Tangible assets – – – – 16,209,774
- Intangible assets 42,000 – – – 42,000
Depreciation and amortisation 5,150,972 32,930 648,374 – 5,832,276
101
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
36. Segmental information (cont’d)
Geographical segments (cont’d)
Singapore Middle East
Asia Pacifi c Region
(other than Singapore) Eliminations Total
$ $ $ $ $
2009Assets and liabilities:Segment assets 163,177,596 26,271,570 23,685,078 – 213,134,244
Investment in associates 881,232 – – – 881,232
Investment in joint venture 138,756 – – – 138,756
Total assets 164,197,584 26,271,570 23,685,078 – 214,154,232
Segment liabilities (75,952,223) (3,656,183) (2,423,792) – (82,032,198)
Unallocated liabilities – – – – (15,855,876)
Total liabilities (75,952,223) (3,656,183) (2,423,792) (97,888,074)
Other segment information:Capital expenditure:
- Tangible assets – – – – 21,419,420
- Intangible assets 41,500 – – – 41,500
Depreciation and amortisation 6,228,553 451,745 732,618 – 7,412,916
102
NOTES TO THE FINANCIAL STATEMENTSfor the fi nancial year ended 30 June 2009
PEC LTD.Annual Report 2009
37. Earnings per share
Basic earnings per share amounts are calculated by dividing the profi t after taxation attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the fi nancial year.
The following table refl ects the income statement and share data used in the computation of basic and diluted earnings per share for the years ended 30 June 2008 and 2009:
Group2009 2008
$ $
Net profi t attributable to shareholders 20,964,741 25,098,281
Weighted average number of ordinary shares for basic earnings per share computation 175,000,000 175,000,000
Earnings per share (cents)
- Basic and diluted 12.0 14.3
38. Dividends
Group2009 2008
$ $
Dividends on ordinary shares declared and paid during the fi nancial years:
Final dividend for 2008: 5.0 (2007: 5.0) cents per share 250,000 250,000
Interim dividend for 2009: 4.6 (2008: Nil) cents per share 8,000,000 –
8,250,000 250,000
39. Authorisation of fi nancial statements for issue
The fi nancial statements for the fi nancial year ended 30 June 2009 were authorised for issue in accordance with a resolution of the Directors on 9 September 2009.
103
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
STATISTICS OF SHAREHOLDINGSas at 22 September 2009
PEC LTD.Annual Report 2009
ISSUED SHARES AND VOTING RIGHTS
No. of issued ordinary shares - 250,600,000
Voting rights - On a show of hands – One vote for each member
On a poll – One vote for each ordinary share
DISTRIBUTION OF SHAREHOLDINGS
SIZE OF SHAREHOLDINGSNO. OF
SHAREHOLDERS % NO. OF SHARES %
1,000 - 10,000 892 59.87 5,393,000 2.15
10,001 - 1,000,000 586 39.33 32,442,000 12.95
1,000,001 AND ABOVE 12 0.80 212,765,000 84.90
TOTAL 1,490 100.00 250,600,000 100.00
SUBSTANTIAL SHAREHOLDERS
NAME OF SHAREHOLDER
NO. OF SHARESTOTAL NO.OF SHARES % OF SHARES
DIRECTINTEREST
DEEMEDINTEREST
Tian San Company (Pte) Limited 85,750,000 – 85,750,000 34.22
MMP Holdings Pte. Ltd. 29,750,000 – 29,750,000 11.87
Case C Pte. Ltd. 13,125,000 – 13,125,000 5.24
Edna Ko Poh Thim1 34,125,000 85,750,000 119,875,000 47.84
Mark Ko Teong Hoon2 – 29,750,000 29,750,000 11.87
Michael Ko Peck Hoon3 – 13,125,000 13,125,000 5.24
Teoh Mei Shu4 – 13,125,000 13,125,000 5.24
Elizabeth Ko Lu Sein5 – 13,125,000 13,125,000 5.24
Prudential Asset Management (Singapore) Limited6 – 12,902,000 12,902,000 5.15
1 Edna Ko Poh Thim is deemed to be interested in 85,750,000 shares held by Tian San Company (Pte) Limited by virtue of Section 7 of the Companies Act, Cap. 50.
2 Mark Ko Teong Hoon is deemed to be interested in 29,750,000 shares held by MMP Holdings Pte. Ltd. by virtue of Section 7 of the Companies Act, Cap. 50.
3 Michael Ko Peck Hoon is deemed to be interested in 13,125,000 shares held by Case C Pte. Ltd. by virtue of Section 7 of the Companies Act, Cap. 50.
4 Teoh Mei Shu is deemed to be interested in 13,125,000 shares held by Case C Pte. Ltd. by virtue of Section 7 of the Companies Act, Cap. 50.
5 Elizabeth Ko Lu Sein is deemed to be interested in 13,125,000 shares held by Case C Pte. Ltd. by virtue of Section 7 of the Companies Act, Cap. 50.
6 As at 23 September 2009, Prudential Asset Management (Singapore) Limited ceased to be a substantial shareholder (please refer to the announcement dated 25 September 2009).
104
STATISTICS OF SHAREHOLDINGSas at 22 September 2009
PEC LTD.Annual Report 2009
TWENTY LARGEST SHAREHOLDERS
NO. NAME NO. OF SHARES %
1 TIAN SAN COMPANY (PTE.) LIMITED 85,750,000 34.22
2 EDNA KO POH THIM 34,125,000 13.62
3 MMP HOLDINGS PTE. LTD. 29,750,000 11.87
4 CITIBANK NOMINEES SINGAPORE PTE LTD 15,243,000 6.08
5 HSBC (SINGAPORE) NOMINEES PTE LTD 13,682,000 5.46
6 CASE C PTE. LTD. 13,125,000 5.24
7 V INVESTMENTS PRIVATE LIMITED 7,000,000 2.79
8 WONG PENG 5,600,000 2.23
9 KIM ENG SECURITIES PTE. LTD. 2,723,000 1.09
10 ASDEW ACQUISITIONS PTE LTD 2,500,000 1.00
11 OCBC SECURITIES PRIVATE LTD 1,948,000 0.78
12 PHILLIP SECURITIES PTE LTD 1,319,000 0.53
13 UOB KAY HIAN PTE LTD 945,000 0.38
14 DBS VICKERS SECURITIES (S) PTE LTD 821,000 0.33
15 CHUAH SWEE CHOO 740,000 0.30
16 TAN HING YOON 700,000 0.28
17 ANNE CHEW SIEW CHOO 590,000 0.24
18 LIM JIEW TONG @ LIM YEW TONG 538,000 0.21
19 DBS NOMINEES PTE LTD 501,000 0.20
20 ALPHA SECURITIES PTE LTD 500,000 0.20
TOTAL 218,100,000 87.05
PERCENTAGE OF SHAREHOLDING HELD IN PUBLIC HANDS
Based on the information available to the Company as at 22 September 2009, approximately 29.87% of the issued ordinary shares of the Company is held by the public and therefore, Rule 723 of the SGX-ST Listing Manual has been complied with.
The Company does not hold any treasury shares.
105
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
NOTICE OF ANNUAL GENERAL MEETING
PEC LTD.Annual Report 2009
PEC LTD.(Incorporated in Singapore)
(the ‘Company’)(Registration No: 198200079M)
NOTICE IS HEREBY GIVEN that the Annual General Meeting of the Company will be held at Ballroom 4, Sheraton Towers Singapore Hotel, 39 Scotts Road, Singapore 228230 on Thursday, 29 October 2009 at 3.00 p.m. for the following purposes:
AS ROUTINE BUSINESS:
1. To receive and adopt the Directors’ Report and Audited Accounts of the Company for the fi nancial year ended 30 June 2009 and the Auditors’ Report thereon. (Resolution 1)
2. To re-elect Mr Wong Peng, being a Director who retires by rotation pursuant to Article 114 of the Articles of Association of the Company. (Resolution 2)
3. To re-elect Mr Ho Yew Mun, being a Director who retires pursuant to Article 118 of the Articles of Association of the Company.
[See Explanatory Note (i)] (Resolution 3)
4. To re-elect Dr Foo Fatt Kah, being a Director who retires pursuant to Article 118 of the Articles of Association of the Company.
[See Explanatory Note (ii)] (Resolution 4)
5. To re-elect Mr Chia Kim Huat, being a Director who retires pursuant to Article 118 of the Articles of Association of the Company.
[See Explanatory Note (iii)] (Resolution 5)
6. To approve the payment of Directors’ fees of S$51,000 for the fi nancial year ended 30 June 2009 (2008: S$36,000). (Resolution 6)
7. To re-appoint Messrs Ernst & Young LLP as Auditors of the Company for the ensuing year and to authorise the Directors to fi x their remuneration. (Resolution 7)
8. To transact any other routine business which may properly be transacted at an Annual General Meeting.
AS SPECIAL BUSINESS:
To consider and, if thought fi t, to pass the following resolutions as Ordinary Resolutions, with or without modifi cations:
106
NOTICE OF ANNUAL GENERAL MEETING
PEC LTD.Annual Report 2009
9. “SHARE ISSUE MANDATE
That pursuant to Section 161 of the Companies Act, Cap. 50 and the listing rules of the Singapore Exchange Securities Trading Limited (“SGX-ST”) and notwithstanding the provisions of the Articles of Association of the Company, authority be and is hereby given to the Directors of the Company to:
a. (i) issue shares in the capital of the Company (whether by way of rights, bonus or otherwise); and/or
(ii) make or grant offers, agreements or options (collectively, ‘Instruments’) that may or would require shares to be issued, including but not limited to the creation and issue of (as well as adjustments to) warrants, debentures or other instruments convertible into shares,
at any time and upon such terms and conditions and for such purposes and to such persons as the Directors may in their absolute discretion deem fi t; and
b. (notwithstanding that the authority conferred by this Resolution may have ceased to be in force) issue shares in pursuance of any Instrument made or granted by the Directors while this Resolution was in force,
provided that:
(i) the aggregate number of shares to be issued pursuant to this Resolution (including shares to be issued in pursuance of Instruments made or granted pursuant to this Resolution) does not exceed fi fty per cent. (50%) of the total number of issued shares excluding treasury shares of the Company (as calculated in accordance with sub-paragraph (ii) below), of which the aggregate number of shares to be granted other than on a pro-rata basis to shareholders of the Company with registered addresses in Singapore (including shares to be issued in pursuance of instruments made or granted pursuant to this Resolution) does not exceed twenty per cent. (20%) of the total number of issued shares excluding treasury shares of the Company (as calculated in accordance with sub-paragraph (ii) below);
(ii) for the purpose of determining the aggregate number of shares that may be issued under sub-paragraph (i) above, the percentage of the total number of issued shares excluding treasury shares of the Company shall be calculated based on the total number of issued shares excluding treasury shares of the Company at the time of the passing of this Resolution, after adjusting for:
a) new shares arising from the conversion or exercise of any convertible securities;
b) new shares arising from exercise of share options or vesting of share awards outstanding or subsisting at the time of the passing of this Resolution, provided the options or awards were granted in compliance with Part VIII of Chapter 8 of the Listing Manual of the SGX-ST; and
c) any subsequent bonus issue, consolidation or subdivision of shares;
107
STATEMENT OF CHANGES IN EQUITYyear ended june 30 2009
NOTICE OF ANNUAL GENERAL MEETING
PEC LTD.Annual Report 2009
(iii) the fi fty per cent. 50% limit under sub-paragraph (i) above, may be increased to one hundred per cent. (100%) where the Company undertakes a pro-rata renounceable rights issue;
(iv) in exercising the authority conferred by this Resolution, the Company shall comply with the provisions of the Listing Manual of the SGX-ST for the time being in force (unless such compliance has been waived by the SGX-ST) and the Articles of Association for the time being of the Company; and
(v) unless revoked or varied by the Company in general meeting, the authority conferred by this Resolution shall continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is the earlier.”
[See Explanatory Note (iv)] (Resolution 8)
10. “ISSUE OF SHARES AT A DISCOUNT
That subject to and pursuant to the share issue mandate in Resolution 8 above being obtained, authority be and is hereby given to the Directors of the Company to issue new shares other than on a pro-rata basis to shareholders of the Company at an issue price per new share which shall be determined by the Directors in their absolute discretion provided that such price shall not represent a more than twenty per cent. (20%) discount to the weighted average price per share determined in accordance with the requirements of the SGX-ST.”
[See Explanatory Note (v)] (Resolution 9)
11. “PEC EMPLOYEE SHARE OPTION SCHEME
That the Directors of the Company be and are hereby authorised to offer and grant options in accordance with the provisions of the PEC Employee Share Option Scheme (the “Scheme”) and pursuant to Section 161 of the Companies Act, Chapter 50, to allot and issue from time to time such number of shares in the capital of the Company as may be required to be issued pursuant to the exercise of the options under the Scheme provided always that the aggregate number of shares to be issued pursuant to the Scheme shall not exceed fi fteen percent. (15%) of the total number of issued shares excluding treasury shares of the Company from time to time.”
[See Explanatory Note (vi)] (Resolution 10)
By Order of the Board
Abdul Jabbar Bin Karam DinJoint Company Secretary
Singapore, 12 October 2009
108
NOTICE OF ANNUAL GENERAL MEETING
PEC LTD.Annual Report 2009
Notes:
1. Save as provided in the Articles of Association, a member entitled to attend and vote at the Annual General Meeting is entitled to appoint up to two proxies to attend and vote in his stead. A proxy need not be a member of the Company.
2. The instrument appointing a proxy must be deposited at the Registered Offi ce of the Company at 21 Shipyard Road, Singapore 628144, not less than 48 hours before the time appointed for holding the Annual General Meeting.
EXPLANATORY NOTES:
(i) Mr Ho Yew Mun, upon re-election as a Director of the Company, will remain as the Chairman of the Audit Committee Meeting and a member of the Remuneration Committee and the Nominating Committee. Mr Ho is an Independent Director.
(ii) Dr Foo Fatt Kah, upon re-election as a Director of the Company, will remain as the Chairman of the Remuneration Committee and a member of the Audit Committee and the Nominating Committee. Dr Foo is the Lead Independent Director.
(iii) Mr Chia Kim Huat, upon re-election as a Director of the Company, will remain as the Chairman of the Nominating Committee and a member of the Audit Committee and the Remuneration Committee. Mr Chia is an Independent Director.
(iv) Resolution 8 is to empower the Directors to issue shares in the capital of the Company and/or Instruments (as defi ned above). The aggregate number of shares to be issued pursuant to Resolution 8 (including shares to be issued in pursuance of Instruments made or granted) shall not exceed fi fty per cent. (50%) of the total number of issued shares excluding treasury shares of the Company, with a sub-limit of twenty per cent. (20%) for shares issued other than on a pro rata basis (including shares to be issued in pursuance of Instruments made or granted pursuant to this Resolution) to shareholders with registered addresses in Singapore. The Company may increase the limit to one hundred percent. (100%) where it undertakes a pro-rata renounceable rights issue. For the purpose of determining the aggregate number of shares that may be issued, the percentage of the total number of issued shares excluding treasury shares of the Company will be calculated based on the total number of issued shares excluding treasury shares of the Company at the time of the passing of Resolution 8, after adjusting for (i) new shares arising from the conversion or exercise of any convertible securities; (ii) new shares arising from exercise of share options or vesting of share awards outstanding or subsisting at the time of the passing of Resolution 8, provided the options or awards were granted in compliance with Part VIII of Chapter 8 of the Listing Manual of the SGX-ST; and (iii) any subsequent bonus issue, consolidation or subdivision of shares.
The allotment and issuance of shares in the Company up to one hundred per cent. (100%) of its issued capital by way of a pro-rata renounceable rights issue is a new measure introduced by the Singapore Exchange Limited, in consultation with the Monetary Authority of Singapore, on 20 February 2009 to accelerate and facilitate listed issuers’ fund raising efforts and will be in effect until 31 December 2010.
The aforesaid mandate to issue up to one hundred per cent. (100%) of the Company’s issued capital is conditional upon the Company:
(a) making periodic announcements on the use of the proceeds as and when the funds are materially disbursed; and
(b) providing a status report on the use of proceeds in the annual report.
This mandate, if passed, will provide the Directors with an opportunity to raise funds and avoid prolonged market exposure by reducing the time taken for shareholders’ approval, in the event the need arises. Concerns over the dilution of minority shareholders’ interests are mitigated as all shareholders have equal opportunities to participate and can dispose their entitlements through trading nil-paid rights if they do not wish to subscribe for their rights shares.
(v) Resolution 9 is to authorise the Directors to allot and issue new shares on a non pro-rata basis at a discount not exceeding twenty per cent. (20%). This authority will continue in force until the next Annual General Meeting.
(vi) Resolution 10 is to authorise the Directors to offer and grant options in accordance with the provisions of the Scheme and pursuant to Section 161 of the Companies Act, Cap. 50 to allot and issue shares under the Scheme. The size of the Scheme is limited to fi fteen per cent. (15%) of the total number of issued shares excluding treasury shares of the Company for the time being.
PROXY FORM(Please see notes overleaf before completing this Form)
PEC LTD.(Incorporated in Singapore)(Registration No. 198200079M)
I/We,
of
being a member/members of PEC LTD. (the “Company”), hereby appoint:
Name NRIC/Passport No. Proportion of ShareholdingsNo. of Shares %
Address
and/or failing him/her (delete as appropriate)
Name NRIC/Passport No. Proportion of ShareholdingsNo. of Shares %
Address
or failing him/her the Chairman of the Meeting as my/our proxy/proxies to attend and vote for me/us on my/our behalf and, if necessary, to demand a poll, at the Annual General Meeting of the Company to be held at Ballroom 4, Sheraton Towers Singapore Hotel, 39 Scotts Road, Singapore 228230 on Thursday, 29 October 2009 at 3.00 p.m. and at any adjournment thereof.
The proxy/proxies shall vote on the Resolutions set out in the notice of Meeting in accordance with my/our directions as indicated with an “x” in the appropriate space below. Where no such direction is given, the proxy/proxies may vote or abstain from voting at his/their discretion, on any matter at the Meeting or at any adjournment thereof.
No. Resolutions relating to: For Against
ROUTINE BUSINESS1 Adoption of Directors’ Report and Audited Accounts for the fi nancial year
ended 30 June 2009 (Resolution 1)2 Re-election of Mr Wong Peng as a Director (Resolution 2)3 Re-election of Mr Ho Yew Mun as a Director (Resolution 3)4 Re-election of Dr Foo Fatt Kah as a Director (Resolution 4)5 Re-election of Mr Chia Kim Huat as a Director (Resolution 5)6 Approval of Directors’ fees amounting to S$51,000 (Resolution 6)7 Re-appointment of Messrs Ernst & Young LLP as Auditors (Resolution 7)8 Any other business
SPECIAL BUSINESS9 Authority for Directors to allot and issue new shares pursuant to Section 161 of
the Companies Act, Cap. 50 (Resolution 8)10 Authority for Directors to allot and issue new shares on a non pro-rata basis at
a discount not exceeding twenty per cent. (20%) (Resolution 9)11 Authority for Directors to offer and grant options and issue shares in accordance
with the provisions of the PEC Employee Share Option Scheme (Resolution 10)
* Please indicate your vote “For” or “Against” with a tick ( ) within the box provided.
Dated this day of 2009
Total Number of Shares held in:
CDP Register
Register of Members
Signature(s) of member(s) or Common Seal of Corporate Shareholder
IMPORTANT: PLEASE READ NOTES OVERLEAF.
IMPORTANT:
1. For Investors who have used their CPF monies to buy PEC Ltd.’s shares, this Annual Report is forwarded to them at the request of their CPF Approved Nominees and is sent solely FOR INFORMATION ONLY.
2. This Proxy Form is not valid for use by CPF investors and shall be ineffective for all intents and purposes if used or purported to be used by them.
Notes:
1. Please insert the total number of shares held by you. If you have shares entered against your name in the Depository Register (as defi ned in Section 130A of the Companies Act, Chapter 50), you should insert that number of shares. If you have shares registered in your name in the Register of Members of the Company, you should insert that number of shares. If you have shares entered against your name in the Depository Register and shares registered in your name in the Register of Members, you should insert the aggregate number of shares. If no number is inserted, this form of proxy will be deemed to relate to all the shares held by you.
2. Save as provided in the Articles of Association, a member entitled to attend and vote at the Annual General Meeting of the Company is entitled to appoint up to two proxies to attend and vote in his stead. A proxy need not be a member of the Company.
3. The instrument appointing a proxy or proxies must be deposited at the Company’s Registered Offi ce at 21 Shipyard Road, Singapore 628144 not less than 48 hours before the time set for the meeting.
4. Where a member appoints more than one proxy, he shall specify the proportion of his shareholding to be represented by each proxy.
5. The instrument appointing a proxy or proxies must be under the hand of the appointor or of his attorney duly authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed under its common seal or under the hand of its offi cer or attorney duly authorised.
6. Where an instrument appointing a proxy or proxies is signed on behalf of the appointor by an attorney, the power of attorney (or other authority) or a duly certifi ed copy thereof must (failing previous registration with the Company) be lodged with the instrument of proxy, failing which the instrument may be treated as invalid.
7. A corporation which is a member may authorise by resolution of its directors or other governing body such person as it thinks fi t to act as its representative at the meeting, in accordance with Section 179 of the Companies Act, Chapter 50.
First fold
PEC LTD. 21 Shipyard Road Singapore 628144
Second fold
General:
The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specifi ed in the instrument appointing a proxy or proxies. In addition, in the case of shares entered in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if the member, being the appointor, is not shown to have shares entered against his name in the Depository Register as at 48 hours before the time appointed for holding the Annual General Meeting, as certifi ed by The Central Depository (Pte) Limited to the Company.
AFFIXPOSTAGE
STAMP
Corporate information
BoarD oF DirECTorSEdna Ko Poh Thim (Executive Chairman)Robert Dompeling (Group Chief Executive Officer)Wong Peng (Managing Director)Dr Foo Fatt Kah (Lead Independent Director)Chia Kim Huat (Independent Director)Ho Yew Mun (Independent Director)
auDiT CoMMiTTEEHo Yew Mun – ChairmanChia Kim HuatDr Foo Fatt Kah
rEMunEraTion CoMMiTTEEDr Foo Fatt Kah – ChairmanChia Kim HuatHo Yew Mun
noMinaTinG CoMMiTTEEChia Kim Huat – ChairmanDr Foo Fatt KahHo Yew Mun
joinT CoMPanY SECrETariESAbdul Jabbar Bin Karam Din, LLB (Hons)Loh Lee Eng, ACIS
SHarE rEGiSTrarBoardroom Corporate & Advisory Services Pte. Ltd.3 Church Street #08-01Samsung HubSingapore 049483
inDEPEnDEnT auDiTorSErnst & Young LLPPublic Accountants and Certified Public AccountantsOne Raffles QuayNorth Tower, Level 18Singapore 048583Partner-in-charge: Mr Max Loh Khum Whai(since financial year ended 30 June 2007)
PrinCiPaL BankErSThe Hongkong and Shanghai BankingCorporation Limited21 Collyer Quay#08-01 HSBC BuildingSingapore 049320
Oversea-Chinese Banking Corporation Limited63 Chulia Street#06-00 OCBC Centre EastSingapore 049514
rEGiSTErED oFFiCE21 Shipyard RoadSingapore 628144Tel: +65 6268 9788Fax: +65 6268 9488Website: www.peceng.com
CoMPanY rEGiSTraTion nuMBEr198200079M
The initial public offering of PEC Ltd. was sponsored by DBS Bank Ltd. (the “Issue Manager”). The Issue Manager assumes no responsibility for the contents of this annual report.