FINANCIAL STATEMENTS
B. AMOUNT DUE FROM/(TO) AN ASSOCIATE
31. FINANCIAL INSTRUMENTS (CONT’D) (a) Financial risk management policies (cont’d)
(ii) Foreign Currency Risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.
The Group and the Company are exposed to foreign currency risk mostly on its sales, bank balances and purchases that are denominated in currencies other than the functional currency of the Group and of the Company. The currency giving rise to this risk is primarily in USD and SGD.
Sensitivity analysis
At the end of the reporting date, the management of the Group and of the Company determined that the effects of sensitivity of the Group’s and of the Company’s profit for the financial year to a reasonably possible change in other currencies exchange rates to be insignificant to the financial statements.
(iii) Liquidity Risk
Liquidity risk is the risk that the Group and the Company will encounter difficulty in meeting financial 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 financial assets and liabilities. The Group’s and the Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of credit facilities.
The table below summarises the maturity profile of the Group’s and the Company’s financial liabilities as at the end of reporting date based on undiscounted contractual payments.
131
LAY HONG BERHAD I Annual Report 2020
Notes to the Financial Statements
31st March 2020
(cont’d)
31. FINANCIAL INSTRUMENTS (CONT’D) (a)Financial risk management policies (cont’d) (iii)Liquidity Risk (cont’d) ContractualBetween GroupCarryingundiscountedWithin onetwo to five After five amount cash flows yearyearsyears 2020 RMRMRMRMRM Financial liabilities: Trade and other payables 137,045,234 137,045,234 135,841,6231,203,611– Amount due to an associate 3,005,098 3,005,098 3,005,098– – Bank overdrafts 5,017,490 5,017,490 5,017,490– – Bankers’ acceptance 139,793,000139,793,000139,793,000– – Lease liabilities 39,219,224 44,403,321 13,826,12225,471,975 5,105,224 Term loans100,312,890113,583,343 25,005,81770,614,69117,962,835 Revolving credit 15,000,000 15,000,000 15,000,000– – 439,392,936457,847,486 337,489,150 97,290,27723,068,059 2019 Financial liabilities: Trade and other payables126,369,842 126,369,842 125,241,8221,128,020– Amount due to an associate 392,261 392,261 392,261– – Bank overdrafts 7,223,323 7,223,323 7,223,323– – Bankers’ acceptance 134,026,000134,026,000134,026,000– – Finance lease liabilities 30,769,695 34,030,763 10,577,19123,453,572– Term loans 93,429,512120,522,659 20,029,58262,670,17637,822,901 Revolving credit 17,000,000 17,000,000 17,000,000– – 409,210,633 439,564,848 314,490,179 87,251,76837,822,901
Notes to the Financial Statements
31st March 2020
(cont’d)
31. FINANCIAL INSTRUMENTS (CONT’D) (a)Financial risk management policies (cont’d) (iii)Liquidity Risk (cont’d) ContractualBetween Company CarryingundiscountedWithin onetwo to five After five amount cash flows yearyearsyears 2020 RMRMRMRMRM Financial liabilities: Trade and other payables 65,464,490 65,464,490 65,464,490– – Amount due to subsidiaries 29,670,10329,670,10329,670,103– – Bank overdrafts 1,289,937 1,289,937 1,289,937– – Bankers’ acceptances 73,715,000 73,715,000 73,715,000– – Lease liabilities 10,475,065 11,485,797 4,005,322 7,480,475– Term loans 59,305,340 65,228,501 17,469,62646,727,1581,031,717 Revolving credit 15,000,000 15,000,000 15,000,000– – 254,919,935 261,853,828 206,614,47854,207,6331,031,717 2019 Financial liabilities: Trade and other payables 57,371,287 57,371,287 57,371,287– – Amount due to subsidiaries 12,927,803 12,927,803 12,927,803– – Bank overdrafts 45,629 45,629 45,629– – Bankers’ acceptance 74,916,000 74,916,000 74,916,000– – Finance lease liabilities 10,065,070 11,055,473 3,776,454 7,279,019 – Term loans 53,197,620 68,351,276 11,938,43643,375,04113,037,799 Revolving credit 17,000,000 17,000,000 17,000,000– – 225,523,409 241,667,468 177,975,609 50,654,060 13,037,799
133
LAY HONG BERHAD I Annual Report 2020
Notes to the Financial Statements
31st March 2020
(cont’d)
31. FINANCIAL INSTRUMENTS (CONT’D)
(a) Financial risk management policies (cont’d)(iv) Credit Risk
Credit risk is the risk of a financial loss to the Group and Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group’s and the Company’s exposure to credit risk arises principally from their trade and other receivables and advances to subsidiaries.
The credit risk is controlled by the application of credit approvals, limits and monitoring procedures.
Credit risks are minimised and monitored via strictly limiting the Group’s and the Company’s associations to business partners with high credit worthiness. The Group and Company also have an internal credit review which is conducted if the credit risk is material. Trade receivables are monitored on an ongoing basis via the Group and the Company management reporting procedures.
Concentration of credit risk
Management has taken reasonable steps to ensure that receivables that are neither past due nor impaired are measured at their realisable values. A significant portion of these receivables are regular customers that have been transacting with the Group and Company. The Group and Company use ageing analysis to monitor the credit quality of the receivables. Any past due receivables having significant balances, which are deemed to have higher credit risk, are monitor individually.
The Group and Company applied the simplified approach to measure the loss allowance at lifetime expected credit losses for all trade receivables. The Group and Company determine the Expected Credit Loss (“ECL”) on these items by using a provision matrix, where applicable, estimated based on historical credit loss experience based on the past due status of the receivables, adjusted as appropriate to reflect current conditions and estimates of future economic conditions.
The following ageing of trade receivables provides information about the exposure to credit risk and ECLs for trade receivables:
Group Gross-carrying Individual
amount impairment ECL Net balance
2020 RM RM RM RM
Not past due 87,780,735 (1,809,094) – 85,971,641
Up to 90 days past due 1,660,775 (149,448) (398) 1,510,929 More than 91 days past due
11,566,063 (8,089,292) (1,484,501) 1,992,270
13,226,838 (8,238,740) (1,484,899) 3,503,199 101,007,573 (10,047,834) (1,484,899) 89,474,840
2019
Not past due 83,209,459 – – 83,209,459
Up to 90 days past due 3,137,660 – (302,403) 2,835,257
More than 91 days past due 13,982,314 (6,707,738) (2,737,549) 4,537,027
17,119,974 (6,707,738) (3,039,952) 7,372,284 100,329,433 (6,707,738) (3,039,952) 90,581,743
Notes to the Financial Statements
31st March 2020
(cont’d)
31. FINANCIAL INSTRUMENTS (CONT’D)
(a) Financial risk management policies (cont’d)(iv) Credit Risk (cont’d)
Company Gross-carrying Individual
amount impairment ECL Net balance
2020 RM RM RM RM
Not past due 23,238,770 – – 23,238,770
Up to 90 days past due 190,298 – – 190,298
More than 91 days past due 7,498,273 (6,037,441) (705,867) 754,965
7,688,571 (6,037,441) (705,867) 945,263
30,927,341 (6,037,441) (705,867) 24,184,033
2019
Not past due 25,709,236 – – 25,709,236
Up to 90 days past due 606,856 – (91,569) 515,287
More than 91 days past due 8,031,964 (4,288,108) (1,196,710) 2,547,146
8,638,820 (4,288,108) (1,288,279) 3,062,433
34,348,056 (4,288,108) (1,288,279) 28,771,669
Trade receivables that are neither past due nor impaired are creditworthy debtors with good payment records with the Group and the Company. None of the Group’s and the Company’s trade receivables that are neither past due nor impaired have been renegotiated during the financial year.
As at 31st March 2020, the Group and the Company have significant concentration of credit risk in the form of outstanding balances of approximately RM 12,354,911 and RM8,077,089 due from a trade receivable (2019 : Nil) which represents 13.8% and 33.4% of the total trade receivables of the Group and Company respectively. However, the Directors are of the opinion that these amount outstanding is fully recoverable.
Credit risk and receivables are monitored on an ongoing basis. These procedures substantially mitigate credit risk of the Group and of the Company.
The trade receivables are not secured by any collateral or supported by any other credit enhancements.
In respect of other receivables, the Group and the Company is not subjected to any significant credit risk exposure to any single counterparty or a group of counterparties having similar characteristics.
The Company provides unsecured loans and advances to subsidiaries. As at the end of the reporting date, the maximum exposure to credit risk is represented by its carrying amounts in the statements of financial position.
135
LAY HONG BERHAD I Annual Report 2020
Notes to the Financial Statements
31st March 2020