Kimlun Corporation Berhad Annual Report 2019

Annual Report 2019 Kimlun Corporation Berhad MANAGEMENT DISCUSSION AND ANALYSIS (cont’d) Cash Flow For FY2019, the Group registered net cash inflow from operating activities of RM10.55 million. Net cash used in investing activities was RM91.86 million, mainly for the purchase of land held for development. Net cash generated from financing activities of RM104.04 million was mainly attributable to the proceeds from loans and borrowings and issuance of shares. Due to the net cash inflow of RM22.73 million during FY2019, the Group’s cash and cash equivalents was RM18.73 million as at 31 December 2019. PROSPECTS AND OUTLOOK Though the Group is supported by an estimated construction and manufacturing balance order book of approximately RM1.3 billion and RM0.24 billion respectively as at 31 December 2019, the Board takes cognizance that the Group’s near term growth and financial results are expected to be impacted negatively by the recent outbreak of the Coronavirus (“Covid-19”) which has adversely affected economies worldwide. For the Group, the impact on business operations has not been a direct consequence of the Covid-19 outbreak, but a result of the measures taken by the Malaysia Government and Singapore Government to contain it. These are unprecedented and challenging times for the Group. As the outbreak continues to evolve, it is challenging to predict the full extent and duration of its impact on business and the economy. Following the Malaysia Government’s implementation of a Movement Control Order (“MCO”) on 18 March 2020 in response to the Covid- 19 outbreak, all the Group’s operations have been shut down during the MCO period except for the minimum permitted critical works such as slope protection and delivery of products for permitted critical works. Consequentially, the Group’s revenue, earnings, cash flow and financial condition are affected negatively by the MCO. The Group’s revenue streams have been severely reduced during the MCO period due to the shutting down of the Group’s operations whilst the Group continues to incur substantially the same amount of fixed and recurring expenses such as depreciation, payroll expenses, rental and interest expenses. Though the Malaysia Government has allowed most business sectors to resume operations under the conditional MCO period beginning 4 May 2020, there are significant uncertainties in assessing how long the pandemic would last and the severity of its impact on the economy. The Group will continue to monitor the development of these events and have implemented the following measures to mitigate the impact of Covid-19 to the Group’s business: (i) take the necessary precautionary measures at our business premises and work sites in accordance with guidelines from health authorities and government bodies; (ii) frequent senior management operation meetings conducted via online platform to strategize and identify operational issues so that operations can resume smoothly post-MCO; (iii) communicate with suppliers as to their stocks readiness and look for alternative supplies to improve supply chain lead times where necessary; (iv) exploring cost cutting measures to preserve cash to support working capital requirements until the Covid-19 situation improves, such as suspending all non-essential operating and capital expenditure; and (v) exploring additional working capital credit facilities for contingency needs. Other than the challenges brought by the outbreak of the Covid-19 and the measures to curb the spread of the virus, our key challenges and risks include operational, credit, liquidity, human resources and market risks. Please refer to pages 51 to 52 of this Annual Report for nature of the key risks and the Group’s control measures to mitigate the risks. 21