PRG Holdings Berhad Annual Report 2019

PRG HOLDINGS BERHAD 16 The Group has managed to strengthen its balance sheet while realigning some of its businesses during the financial year. This is seen through its diversification into agriculture, and a shift in focus for its property development to target the middle-income households. FINANCIAL REVIEW (SEGMENT) 1. Manufacturing Division The Manufacturing Division recorded a total revenue of RM119.6 million and loss before tax of RM37.3 million in FY2019 (2018: total revenue and profit before tax of RM73.6 million and RM5.0 million respectively). Revenue for the financial year was higher mainly due to additional revenue contributed by the newly acquired Meinaide Holdings Group Limited, together with its subsidiaries in Hong Kong and the People’s Republic of China (the “PRC”) (the “Acquisition of the Meinaide Group”) in the third quarter of FY2019, as well as increase in sales volume for covered elastic yarn and webbing products during the financial year. Despite the increase in revenue, the bottom line of the Manufacturing Division was at a loss position, mainly due to the impairment loss on goodwill arising from the Acquisition of the Meinaide Group which amounted to approximately RM34.5 million due to the challenging operating environment, arising from the geo-political instability, volatility of commodities market, fluctuation of foreign exchange currency and low visibility of demand. The results was further impacted by impairment loss on assets held for sale amounting to approximately RM5.6 million as the consideration of the proposed disposal of PEWA is lower than the carrying amount of PEWA and impairment loss on goodwill arising from investment in associate, amounted to approximately RM3.2 million due to weaker sales performance during the year. On 7 October 2019, PRG announced that FHL had entered into a binding term sheet with an independent third-party potential purchaser on 4 October 2019 for the sale of PEWA, a subsidiary of FHL, which is principally engaged in the manufacture and sale of narrow elastic fabrics. Subsequently on 13 January 2020, PRG announced that FHL had on 10 January 2020 entered into a capital transfer agreement with Four K Investment Limited (“Four K”) for the transfer of the entire registered and paid-in charter capital of USD2,100,000 of PEWA and agreed inter-company loans and debts settlement owed by PEWA, for a total cash consideration of USD2,945,911 (equivalent to approximately RM12,028,155). Upon completion of the disposal of PEWA, PEWA will cease to be an indirect wholly-owned subsidiary of FHL. MANAGEMENT DISCUSSION AND ANALYSIS cont’d