Oct 2023 :- Annual Report 2023

ACCELERATION,

INNOVATION

ANNUAL REPORT 2023

ACCELERATION,

INNOVATION

We accelerate our devotion towards innovative advancement, meeting expectations of the everchanging market. We will continue to be reliable as ever in each division, breakthrough from limitations and set ourselves apart from others.

CONTENTS

02 Corporate Information

03 Financial Highlights

04 History, Principal Activities and Group Structure

05 Management Discussion and Analysis

09 Sustainability Statement

11 Profile of Directors

1. Profile of Key Senior
   Management
2. Corporate Governance Overview Statement

26 Additional Information

28 Statement on Risk Management and Internal Control

30 Audit Committee Report

32 Directors' Report

1. Directors' Statement and
   Statutory Declaration
2. Independent Auditors'
   Report to the Members

43 Statements of Financial Position

45 Statements of Comprehensive Income

47 Consolidated Statement of Changes in Equity

1. Statement of Changes in Equity
2. Statements of Cash Flow

54 Notes to the Financial Statements

114 Notice of Annual General Meeting

1. Statement Accompanying Notice of Annual General Meeting
2. List of Properties

121 Analysis of Shareholdings

124 Analysis of Warrant Holdings

Enclosed Proxy Form

CORPORATE INFORMATION

Directors

Lee Min Huat

(Executive Chairman)

Lim Chiow Hoo

(Managing Director)

Lim Ee Tatt (Non-Independent Non-ExecutiveDirector)

Hsu, Ching-Chen(Non-Independent Non-ExecutiveDirector)

Law Kim Fatt

(Independent Non-Executive Director)

Yap Ee Seong

(Independent Non-Executive

Director)

Yau Khai Ling

(Independent Non-Executive

Director)

Company Secretaries

Chee Wai Hong (BC/C/1470)

SSM PC No. 202008001804

Tan She Chia (MAICSA 7055087)

SSM PC No. 202008001923

Audit Committee

Law Kim Fatt (Chairman)

Yap Ee Seong

Lim Ee Tatt

Remuneration Committee

Yap Ee Seong (Chairman)

Lim Ee Tatt

Law Kim Fatt

Nomination Committee

Yap Ee Seong (Chairman)

Law Kim Fatt

Registered Office

48, Jalan Chow Thye

10050 George Town

Pulau Pinang

Tel: [phone]

Email: [e-mail]

Business Address

Lot 6181 Jalan Perusahaan 2

Kawasan Perindustrian Parit Buntar

34200 Parit Buntar, Perak

Tel: [phone]

Fax: [phone]

Email: [e-mail] [e-mail]

Share Registrar

Boardroom Share Registrars Sdn. Bhd.

11th Floor, Menara Symphony

No. 5, Jalan Prof. Khoo Kay Kim

Seksyen 13

46200 Petaling Jaya

Selangor Darul Ehsan Tel: [phone] Fax: [phone] Email: [e-mail]

Auditors

Grant Thornton Malaysia PLT

Chartered Accountants

Level 5, Menara BHL Bank

51, Jalan Sultan Ahmad Shah

10050 George Town, Penang

Tel: [phone]

Fax: [phone]

Principal Bankers

AmBank (M) Berhad

AmInvestment Bank Berhad

Affin Islamic Bank Berhad

Stock Exchange Listing

ACE Market of Bursa Malaysia Securities Berhad

Stock Name for Ordinary Shares: SCOPE (Stock Code: 0028) Stock Name for Warrants: SCOPE-WB (Stock Code: 0028WB)

Website

http://www.scope.com.my

02

SCOPE INDUSTRIES BERHAD

Annual Report 2023

FINANCIAL

HIGHLIGHTS

	FYE 2019	FYE 2020	FYE 2021	FYE 2022	FYE 2023
Revenue	15,550,162	19,638,255	87,188,214	171,040,611	172,795,683
Profit/(Loss) before tax	(5,209,069)	(26,094,479)	7,876,339	7,678,874	1,715,924
Equity	121,184,130	101,376,713	126,981,890	204,267,397	207,849,168
Net assets per share (sen)	19.57	15.33	16.51	17.71	18.02
Number of Shares in issue	619,132,873	661,458,273	769,115,306	1,153,672,959	1,153,672,959

Revenue

171,040,611 172,795,683

87,188,214

15,550,162 19,638,255

FYE	FYE	FYE	FYE	FYE
2019	2020	2021	2022	2023

Equity

204,267,397 207,849,168

121,184,130	126,981,890

101,376,713

Profit/(Loss) before tax

7,876,339 7,678,874

1,715,924

(5,209,069)

(26,094,479)

FYE	FYE	FYE	FYE	FYE
2019	2020	2021	2022	2023

Net assets per share (sen)

19.57

17.71

18.02

16.51

15.33

FYE	FYE	FYE	FYE	FYE
2019	2020	2021	2022	2023

FYE	FYE	FYE	FYE	FYE
2019	2020	2021	2022	2023

SCOPE INDUSTRIES BERHAD

Annual Report 2023

03

HISTORY, PRINCIPAL ACTIVITIES

AND GROUP STRUCTURE

Scope Industries Berhad ("Scope") was incorporated in Malaysia on 2 September 2002 under the Companies Act, 1965 as a public limited company under its present name. Scope is principally an investment holding company with three (3) wholly- owned subsidiaries, namely Scope Manufacturers (M) Sdn. Bhd. ("SMSB"), Benua Mutiara Sdn. Bhd. ("BMSB") and Scope Realty Sdn. Bhd. ("SRSB"). Besides that, Scope has a seventy percent (70%) owned subsidiary, Pioneer Glow Sdn. Bhd. ("PGSB") and a eighty percent (80%) owned subsidiary, Scope Global Distributor Pte. Ltd. ("SGDPL").

The core business of Scope Group are manufacture of electrical and electronics components and products, oil palm plantation and trading of electronic products.

The current group structure is as follows:-

(Incorporated in Malaysia)

100%

SMSB

80%

SGDPL

100%

BMSB

100%

SRSB

70%

PGSB

The principal activities of its subsidiaries are as follow:-
Companies	Date and Place of Incorporation	Principal activities
Subsidiaries
Scope Manufacturers (M)	20 November 1991	Manufacturing and assembling of electrical and
Sdn. Bhd. (SMSB)	Malaysia	electronics components and products.
Benua Mutiara Sdn. Bhd.	28 September 1990	Cultivation of oil palm.
(BMSB)	Malaysia
Pioneer Glow Sdn. Bhd.	20 August 1997	Cultivation of oil palm.
(PGSB)	Malaysia
Scope Global Distrubutor	15 October 2020	Trading in electrical and electronic products.
Pte. Ltd. (SGDPL)	Singapore
Scope Realty Sdn. Bhd.	2 August 2022	Property investments and provision of dormitory
(SRSB)	Malaysia	accomodation and services.

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SCOPE INDUSTRIES BERHAD

Annual Report 2023

MANAGEMENT DISCUSSION

AND ANALYSIS

BUSINESS AND OPERATIONS OVERVIEW

Scope Industries Berhad ("Scope" or "the Company") is principally an investment holding company with its subsidiaries ("the Group") engage in the manufacturing and assembling of electrical and electronics components and products, cultivation of oil palms and trading of electrical and electronic products.

The Group's core business consist of three (3) key segments:

1. Manufacturing Division
   - Manufacture and assembly of electrical and electronic components and products

Scope Manufacturers (M) Sdn. Bhd. ("SMSB") is the Group's largest business division which began its operation for more than three (3) decades in the assembly of printed circuit board ("PCBA"). Through effective business network, SMSB has established itself in the electronic industry as a reliable and high quality service provider for PCBA and complete box-build to reputable Original Equipment Manufacturing ("OEM") companies. The main plant of SMSB is strategically located at Parit Buntar industrial area in Perak, which is a state in close proximity to Penang.

1. Plantation Division
   - Cultivation of oil palms

This division involves in cultivation of oil palms by two (2) subsidiaries: Pioneer Glow Sdn. Bhd. ("PGSB") and Benua Mutiara Sdn. Bhd. ("BMSB"). As at 30 June 2023, the division has a total land area of approximately 1,736 hectares in Sabah, Malaysia.

1. Trading Division
   - Trading in electrical and electronic products

Scope Global Distributor Pte. Ltd. ("SGDPL") is an operating company located in Singapore, a country in Southeast Asia having a strategic position at the confluence of the East and West and serve as an important global business hub.

The principal activities of SGDPL are to carry on the business of traders in electrical and electronics products. As part of the Group effort to boost sales, SGDPL also involves in the trading of Information and Communications Technology ("ICT") products. A surge in demand of ICT products was driven by an accelerating reliance on digital technologies and market trend.

FINANCIAL PERFORMANCE REVIEW OF THE GROUP

1. Revenue
   The Group revenue for the financial year ended 30 June 2023 ("FY 2023") increased slightly by 1% to RM172.8 million, from RM171.0 million in the financial year ended 30 June 2022 ("FY 2022"). It was mainly due to higher revenue from
   Manufacturing Division.
2. Gross Profit
   The cost of sales increased by 3.73%, from RM157.2 million in FY 2022 to RM163.1 million in FY 2023. It was largely attributable to higher operational costs in Manufacturing Division such as direct labour costs and factory overhead.
   The Group recorded lower gross profit at RM9.70 million for FY 2023 (FY 2022: RM13.81 million) mainly due to higher operational costs in Manufacturing Division as well as significant decrease in average Fresh Fruit Bunches ("FFB") price for Plantation Division.

SCOPE INDUSTRIES BERHAD

Annual Report 2023

05

MANAGEMENT DISCUSSION

AND ANALYSIS

FINANCIAL PERFORMANCE REVIEW OF THE GROUP (Cont'd)

1. Operating Profit
   Operating profit for FY 2023 was RM0.74 million, a decrease of 89.4% compared with FY 2022 mainly due to following reasons:
2. 1. Lower gross profit generated for both Manufacturing and Plantation Division; and
   2. Higher administrative expenses in FY 2023 due to recording of impairment loss on goodwill at group level amounted to RM2.83 million. This was in relation to the goodwill allocated to one of our subsidiary, BMSB's cash-generating unit
      ("CGU"). The recoverable amount of this CGU for FY 2023 has been determined based on value-in-use method. After making an assessment on goodwill impairment and having regard to commencement of replanting activities of the estate in BMSB, the current recoverable amount is lesser than the carrying value of CGU. As such, impairment loss on goodwill has been recognised in administrative expenses.

1. Profit
   Profit before tax ("PBT") declined by 77.7% from RM7.68 million in FY 2022 to RM1.72 million in FY 2023. Profit after tax
   ("PAT") for the Group was RM1.35 million (FY 2022: RM6.94 million).
2. Liquidity and Capital Management
   Total equity as at 30 June 2023 were RM207.85 million, an increase of 1.8% from RM204.27 million in the last financial year. Earnings per share for FY 2023 was 0.07 sen in FY 2023, as compared to 0.54 sen in FY 2022.
   The borrowings merely comprise hire purchase facility relating to manufacturing division, which was reduced to RM0.07 million as at 30 June 2023 (30 June 2022: RM1.64 million).
   As at 30 June 2023, cash and cash equivalents stood at RM30.52 million, representing a decrease of RM19.56 million or 39.1%, compared with RM50.08 million in the last financial year. It was largely attributable to the capital expenditures on the purchase of property, plant and equipment for expansion of manufacturing facility. Nonetheless, the Group will be prudent in managing the cash hoard. This is to ensure the Group has ample financial resources for implementing its business strategies, current and future operations and capital requirements.

BUSINESS PERFORMANCE BY SEGMENTS

1. Manufacturing Division
   Despite an increase of revenue to RM41.38 million in FY 2023 (FY 2022: RM36.25 million), the manufacturing division posted lower operational PAT at RM1.27 million, as compared to RM3.19 million in FY 2022. It was mainly due to decrease in average selling price and higher operational costs, particularly in direct labour and factory overhead.
   Following the expansion and investment in our manufacturing facilities, we continuously focus on operating our core business of PCBA as well as manufacture of complete box-build products, which complements PCBA business.
   In view of the supply and demand dynamics, we have been closely monitoring and evaluating our production schedule for achieving optimal operating condition, which is crucial to meet deadline of product delivery. Efficiency in production process remains the key area of focus for the manufacturing division. In addition, we are committed to maintaining profitable performance for the Group by securing more orders from customers.
2. Plantation Division
   This year, the plantation division recorded revenue of RM11.05 million, a decrease of 25.9% as compared to RM14.92 million in FY 2022. It was due to decrease in average FFB price by 32.6%, despite increase in FFB production by 10.0%.
   The PAT of the plantation division decreased to RM1.03 million compared to RM3.60 million in FY 2022, mainly due to decrease in average FFB price.

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SCOPE INDUSTRIES BERHAD

Annual Report 2023

MANAGEMENT DISCUSSION

AND ANALYSIS

BUSINESS PERFORMANCE BY SEGMENTS (Cont'd)

1. Plantation Division (cont'd)
   The FFB production volume and its average selling price together with the changes in percentage are as tabulated below:

Production volume and Price

FY 2023

FY 2022

Changes in Percentage

FFB Production (MT)	14,902	13,545
Average FFB Price (RM)	742	1,101

• 10.0% - 32.6%

As at 30 June 2023, total plantation land stands at approximately 1,736 hectares of which 82.8% or 1,437 hectares are planted with oil palms. All of the planted area comprising mature trees. The average yield for this year was higher at 10.37MT/hectare compared to 8.94MT/hectare in the previous year.

The age profile of developed areas is shown below:

Particulars	Hectare	%
4	- 7 years	79	5.5%
8	- 19 years	799	55.6%
> 19 years	559	38.9%
		1,437	100.0%

The management will strive to improve FFB production and manage the costs for achieving better profitability.

1. Trading Division
   Our subsidiary in Singapore, SGDPL continued its steady growth. It contributed a revenue of RM120.4 million to the Group in FY 2023 (FY 2022: RM119.8 million).
   This division posted higher PAT at RM1.07 million in FY 2023 (FY 2022: RM0.96 million).

OUTLOOK AND PROSPECT

1. Manufacturing Division
   The electronic and electrical ("E&E") industry remains soft and challenging for the new financial year. Geopolitical uncertainty, Ukraine-Russia war, and high inflation are negatively impacting the consumer spending. The Group expects a slowdown in E&E industry due to a decline in orders resulting from the lower consumer demand and slower order flow.
   The Group remains focused on exploring new business opportunities and improving its operational efficiency to ride out this uncertainty and difficult period. We are continuously working tirelessly to keep the momentum going in order to maximise our shareholders' value.

SCOPE INDUSTRIES BERHAD

Annual Report 2023

07

MANAGEMENT DISCUSSION

AND ANALYSIS

OUTLOOK AND PROSPECT (Cont'd)

1. Plantation Division
   The performance of this division is fundamentally contingent on FFB production and the movement of crude palm oil
   ("CPO") price which has a direct impact on FFB price. Apart from that, price volatilities, inflationary pressures on cost, unpredictable weather conditions, labour shortages and biofuel policy changes in Indonesia are amongst the key factors affecting Plantation Division.
   The entire oil palms in one of our plantation estates have reached commercial lifespan of more than 28 years. The replanting activities have started during the financial year. Our plan is to take an estimated timeframe of 5 years to replant this entire plantation estate. On the other hand, for another oil palm estate, the management is closely monitoring the FFB production and taking action to improve harvesting yield.
2. Trading Division
   Trading division remains generating profitable results to the Group's earnings during the FY 2023.
   The management anticipated that this division will continue its path in generating revenue and profit to the Group.
   Moving forward, the management will continuously build on existing customer relationships, develop new customers and identify business opportunities for this Division.

DIVIDEND

The Company does not have a dividend payout policy.

The Board of Directors is taking a conservative stance to maintain a strong cash flow in order to ensure the Group remains resilient amid the present economic uncertainties. The Group will re-invest the earnings to grow its business to enhance shareholders' value in the long run.

Nonetheless, the Company will consider to declare a dividend after taking into consideration of its earnings, capital expenditure and working capital requirements.

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SCOPE INDUSTRIES BERHAD

Annual Report 2023

SUSTAINABILITY

STATEMENT

Scope Industries Berhad ("Scope" or "the Company") and its subsidiaries ("the Group") recognise the importance of sustainability as a key driver for long-term business growth, where success is not merely judged by its business profitability performance, but also fulfillment of the Group's responsibilities to create value for the stakeholders and community. We are mindful of the need to develop businesses in a sustainable and responsible manner, and endeavour to practice, preserve and promote activities contributing benefit and adding value across the main pillars of the economic, environmental and social aspect.

The Group continues to pursue business sustainability by managing its economic, environmental, and social risks and opportunities.

Economic

During the financial year ended 30 June 2023, the Group attained a revenue of RM172.8 million and posted a profit before tax of RM1.7 million. As Malaysia transitions to the endemic phrase of COVID-19, the economy is on an upwards track to recovery from the pandemic and business activities have started to pick up.

Given the global economic uncertainties affecting the business environment, we will continuously adopt a more prudent approach and cost control for the Group operations.

• Customer Relations
  The Group recognises the importance of maintaining strong customer relationship as it affects the Group's business. We are committed to provide high quality products and services in meeting our customers' expectation through continuous upgrading of our technology, process and service.
  A customer survey is conducted on an annual basis. We sincerely accept opinions, requests, and suggestions from customers on various occasions and strive to use these for development and improvement of our products and services, thereby achieving our customer satisfaction.
• Supplier Relations
  We build fair, ethical and lasting relationships with our suppliers. It is essential to have a sustainable supply chain. We review the suppliers based on the price and payment terms, product and service quality, operation scale and geographical proximity to the production facilities. We also regularly monitor the performance of the suppliers. Quotations from various suppliers are obtained to ensure the competitiveness of the pricing. In order to ensure the quality of our finished products, a supplier who fails to fulfill the requirements on product and services quality, may be removed from our approved vendor list.
• Investor Relations
  We recognise the importance of being transparent and accountable to the Company's investors. As such, we ensure proper corporate governance practices are in place and monitored closely and reviewed periodically. The Company's website, www.scope.com.my provides pertinent information and announcements concerning the Group with the objective to foster and maintain a good relationship and provide timely information to the investors.
  Furthermore, Annual General Meeting serves as a platform for the shareholders to engage directly with the Board and key senior management.
  In term of ethical business, the Group recognises that upholding high standards of integrity and ethical corporate conducts in all business activities is necessary to strengthen its corporate reputation and maintain the trust and confidence of all our stakeholders. The Directors are always guided by a Code of Ethics whilst a Code of Conduct spells out the guiding principles for all the employees to do what is right and behave with integrity and honesty. It requires the employees to have stringent obligation as to how they deal with the issues including compliance of law, conflict of interest, confidentiality, insider trading and fair dealing.
  In line with the Section 17A of the Malaysian Anti-Corruption Commission Act 2009 on corporate liability for corruption, the Board has adopted an Anti-Bribery and Corruption Policy to prevent the occurrence of bribery and corrupt practices in relation to the Group's businesses.

SCOPE INDUSTRIES BERHAD

Annual Report 2023

09