ARB IOT Group Ltd 6-K, filed Apr 25, 2024
ARB IOT Group Ltd (ARBB)
About this 6-K
ARB IOT Group Ltd filed this 6-K on April 25, 2024.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the month of, April
Commission File Number
(Translation of registrant’s name into English)
2F-09, Pusat Perdagangan IOI
No. 1 Persiaran Puchong Jaya Selatan,
Bandar Puchong Jaya, 47100 Puchong, Selangor, Malaysia
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F ☒ Form 40-F ☐
EXPLANATORY NOTE
ARB IOT Group Limited (the “Company”) is furnishing this Form 6-K to provide the unaudited consolidated financial statements for the six months ended December 31, 2023 and 2022.
1
FORWARD-LOOKING INFORMATION
This Report on Form 6-K contains forward-looking statements and information relating to us that are based on the current beliefs, expectations, assumptions, estimates and projections of our management regarding our company and industry. When used in this report, the words “may”, “will”, “anticipate”, “believe”, “estimate”, “expect”, “intend”, “plan” and similar expressions, as they relate to us or our management, are intended to identify forward-looking statements. These statements reflect management’s current view of us concerning future events and are subject to certain risks, uncertainties and assumptions, including among many others: our goals and strategies, our future business development, financial condition and results of operations, expected changes in our revenue, costs or expenditure, our expectations regarding demand for and market acceptance of our products and services, competition in our industry, government policies and regulations relating to our industry, and other risks and uncertainties which are generally set forth under the heading, Item 3.D. “Risk Factors” and elsewhere in our Annual Report on Form 20-F filed on October 30, 2023 (the “Annual Report”). Should any of these risks or uncertainties materialize, or should the underlying assumptions about our business and the markets in which we operate prove incorrect, actual results may vary materially from those described as anticipated, estimated or expected in this report.
All forward-looking statements included herein attributable to us or other parties or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except to the extent required by applicable laws and regulations, we undertake no obligations to update these forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events.
2
EXHIBIT INDEX
| Exhibit No. | Description | |
| Exhibit 99.1 | Unaudited Condensed Consolidated Financial Statements of the Registrant for the Six Months Ended December 31, 2023 and 2022 | |
| Exhibit 99.2 | Operating and Financial Review and Prospects in Connection with the Interim Consolidated Financial Statements for the Six Months Ended December 31, 2023 | |
| 101.INS | Inline XBRL Instance Document. | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: April 25, 2024 | ARB IOT GROUP LIMITED | |
| By: | /s/ Dato’ Sri Liew Kok Leong | |
| Dato’ Sri Liew Kok Leong | ||
| Chief Executive Officer | ||
4
Exhibit 99.1
ARB IOT GROUP LIMITED
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
F-1
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2023
F-2
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS AT 31 DECEMBER 2023
| Note | As of 31 December 2023 | As of 30 June 2023 | As of 31 December 2023 | |||||||||||||
| RM | RM | USD | ||||||||||||||
| Assets | ||||||||||||||||
| Current assets | ||||||||||||||||
| Cash and bank balances | 4 | |||||||||||||||
| Trade receivables | 5 | |||||||||||||||
| Other receivables, deposits and prepayments | 6 | |||||||||||||||
| Amount due from related companies | 7 | - | - | |||||||||||||
| Current tax asset | ||||||||||||||||
| Total current assets | ||||||||||||||||
| Non-current assets | ||||||||||||||||
| Property, plant and equipment | 8 | |||||||||||||||
| Right-of-use asset | 9 | |||||||||||||||
| Intangible asset | 10 | |||||||||||||||
| Total non-current assets | ||||||||||||||||
| Total assets | ||||||||||||||||
| Liabilities | ||||||||||||||||
| Current liabilities | ||||||||||||||||
| Trade payables | 11 | - | - | |||||||||||||
| Other payables and accruals | 12 | |||||||||||||||
| Amount due to related companies | 7 | - | - | |||||||||||||
| Amount due to holding companies | 7 | - | ||||||||||||||
| Current tax liability | ||||||||||||||||
| Lease liabilities | 9 | |||||||||||||||
| Total current liabilities | ||||||||||||||||
F-3
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS AT 31 DECEMBER 2023 (CONT’D)
| Note | As of 31 December 2023 | As of 30 June 2023 | As of 31 December 2023 | |||||||||||||
| RM | RM | USD | ||||||||||||||
| Non-current liabilities | ||||||||||||||||
| Deferred tax liabilities | 13 | |||||||||||||||
| Lease liabilities | 9 | |||||||||||||||
| Total non-current liabilities | ||||||||||||||||
| Total liabilities | ||||||||||||||||
| Net assets | ||||||||||||||||
| EQUITY | ||||||||||||||||
| Share capital | 14 | |||||||||||||||
| Capital contribution | 15 | |||||||||||||||
| Reserves | ||||||||||||||||
| Equity attributable to owners of the Company | ||||||||||||||||
| Non-controlling interests | 16 | |||||||||||||||
| TOTAL EQUITY | ||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements
F-4
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME
FOR THE PERIOD ENDED 31 DECEMBER 2023
| Six Months Ended | ||||||||||||||||
| Note | 31 December 2023 | 31 December 2022 | 31 December 2023 | |||||||||||||
| RM | RM | USD | ||||||||||||||
| Revenue | 17 | |||||||||||||||
| Cost of sale | ( | ) | ( | ) | ( | ) | ||||||||||
| Gross (loss)/profit | ( | ) | ( | ) | ||||||||||||
| Other income | ||||||||||||||||
| Administrative expenses | ( | ) | ( | ) | ( | ) | ||||||||||
| Other operating expenses | ( | ) | ( | ) | ||||||||||||
| Finance costs | ( | ) | ( | ) | ( | ) | ||||||||||
| (Loss)/Profit before tax | 18 | ( | ) | ( | ) | |||||||||||
| Tax expense | 19 | |||||||||||||||
| Profit for the financial period | ( | ) | ( | ) | ||||||||||||
| Other comprehensive income for the financial period, net of tax | ||||||||||||||||
| Items that may be reclassified subsequently to profit or loss: | ||||||||||||||||
| Gain on foreign currency translation | ( | ) | ||||||||||||||
| Total comprehensive (loss)/income for the financial period | ( | ) | ( | ) | ||||||||||||
| (Loss)/Profit for the financial period attributable to: | ||||||||||||||||
| Owners of the Company | ( | ) | ( | ) | ||||||||||||
| Non-controlling interests | 16 | |||||||||||||||
| ( | ) | ( | ) | |||||||||||||
| Total comprehensive (loss)/income attributable to: | ||||||||||||||||
| Owners of the Company | ( | ) | ( | ) | ||||||||||||
| Non-controlling interests | ||||||||||||||||
| ( | ) | ( | ) | |||||||||||||
| Weighted average shares outstanding: | ||||||||||||||||
| Basic | 20 | |||||||||||||||
| Diluted | 20 | |||||||||||||||
| (Loss)/Earnings per share attributable to Owners of the Company: | ||||||||||||||||
| Basic | 20 | ( | ) | ( | ) | |||||||||||
| Diluted | 20 | ( | ) | ( | ) | |||||||||||
The accompanying notes are an integral part of these consolidated financial statements
F-5
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 31 DECEMBER 2023
| Total | ||||||||||||||||||||||||||||
| Exchange | attributable | Non- | ||||||||||||||||||||||||||
| Share | Capital | translation | Retained | to Owners | controlling | Total | ||||||||||||||||||||||
| capital | contribution | reserve | earnings | the Company | interests | equity | ||||||||||||||||||||||
| RM | RM | RM | RM | RM | RM | RM | ||||||||||||||||||||||
| Balance at 30 June 2022 | ( | ) | ||||||||||||||||||||||||||
| Profit for the financial period | ||||||||||||||||||||||||||||
| Loss on foreign currency translations | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Total and other comprehensive (loss)/income | ( | ) | ||||||||||||||||||||||||||
| Transaction with Owners | ||||||||||||||||||||||||||||
| Repayment of capital contribution | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Issuance of shares | ||||||||||||||||||||||||||||
| Total transaction with Owners | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance at 31 December 2022 | ( | ) | ||||||||||||||||||||||||||
F-6
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 31 DECEMBER 2023 (CONT’D)
| Total | ||||||||||||||||||||||||||||
| Exchange | attributable | Non- | ||||||||||||||||||||||||||
| Share | Capital | translation | Retained | to Owners | controlling | Total | ||||||||||||||||||||||
| capital | contribution | reserve | earnings | the Company | interests | equity | ||||||||||||||||||||||
| RM | RM | RM | RM | RM | RM | RM | ||||||||||||||||||||||
| Balance at 30 June 2023 | ||||||||||||||||||||||||||||
| (Loss)/Profit for the financial period | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Gain on foreign currency translations | ||||||||||||||||||||||||||||
| Total comprehensive income/(loss) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Transaction with Owners | ||||||||||||||||||||||||||||
| Reclassification of capital contribution to liabilities | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Redemption of non-convertible redeemable preference shares by non-controlling interest of a subsidiary | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Disposal of subsidiaries | ( | ) | ( | ) | ||||||||||||||||||||||||
| Dividend paid to non-controlling interest | ( | ) | ( | ) | ||||||||||||||||||||||||
| Total transaction with Owners | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Balance at 31 December 2023 | ||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements
F-7
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIOD ENDED 31 DECEMBER 2023
| Six Months Ended | ||||||||||||
| 31 December 2023 |
31 December 2022 |
31 December 2023 |
||||||||||
| RM | RM | USD | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||
| (Loss)/Profit before tax | ( |
) | ( |
) | ||||||||
| Adjustments for: | ||||||||||||
| Depreciation of property, plant and equipment | ||||||||||||
| Amortisation of intangible assets | ||||||||||||
| Depreciation of right-of-use asset | ||||||||||||
| Loss on disposal of subsidiaries | ||||||||||||
| Interest expense of lease liabilities | ||||||||||||
| Interest income | ( |
) | ( |
) | ( |
) | ||||||
| Unrealised exchange loss | ||||||||||||
| Waiver of debt | ( |
) | ( |
) | ||||||||
| Operating (loss)/profit before changes in working capital | ( |
) | ( |
) | ||||||||
| Changes in working capital: | ||||||||||||
| Trade receivables | ( |
) | ||||||||||
| Other receivables, deposit and prepayments | ( |
) | ( |
) | ( |
) | ||||||
| Trade payables | ( |
) | ( |
) | ||||||||
| Other payables and accruals | ( |
) | ( |
) | ||||||||
| Cash generated from operations | ||||||||||||
| Interest received | ||||||||||||
| Income tax paid | ( |
) | ( |
) | ( |
) | ||||||
| Net cash generated from operating activities | ||||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||
| Acquisition of property, plant and equipment | ( |
) | ( |
) | ( |
) | ||||||
| Placement of deposit pledged with licensed bank | ||||||||||||
| Proceed from disposal of subsidiaries | ( |
) | ( |
) | ||||||||
| Proceed from redemption of non-convertible redeemable preference shares by non-controlling interest of a subsidiary | ( |
) | ( |
) | ||||||||
| Net cash used in investing activities | ( |
) | ( |
) | ( |
) | ||||||
F-8
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIOD ENDED 31 DECEMBER 2023 (CONT’D)
| Six Months Ended | ||||||||||||
| 31 December 2023 | 31 December 2022 | 31 December 2023 | ||||||||||
| RM | RM | USD | ||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||
| (Repayment to)/ Advance from related companies | ( | ) | ( | ) | ||||||||
| Increase in fixed deposits with the licensed bank | ( | ) | ||||||||||
| Payment of lease liabilities | ( | ) | ( | ) | ( | ) | ||||||
| Repayment to holding company | ( | ) | ( | ) | ||||||||
| Repayment of capital contribution | ( | ) | ||||||||||
| Issuance of share capital | ||||||||||||
| Dividend paid to non-controlling interest | ( | ) | ( | ) | ||||||||
| Net cash (used in)/from financing activities | ( | ) | ( | ) | ||||||||
| Net (decrease)/increase in cash and cash equivalents | ( | ) | ( | ) | ||||||||
| Effect of exchange rate changes | ( | ) | ||||||||||
| Cash and cash equivalents at beginning of the period | ||||||||||||
| Cash and cash equivalents at end of the period | ||||||||||||
| Cash and cash equivalents comprised: | ||||||||||||
| Cash and bank balances | ||||||||||||
| Deposits with licensed banks | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements
F-9
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2023
| 1. | GENERAL INFORMATION |
ARB IOT Group Limited (the “Company”) was incorporated and registered as an exempted company with limited liability in the Cayman Islands under the Companies Act of the Cayman Islands on 1 March 2022. The Company through its subsidiaries (collectively, the “Group”), is engaged in provision of hardware and software of Internet of Things solutions to meet customers demand in four business lines, which are IoT Smart Home and Buildings, IoT Smart Agriculture, IoT System Development and IoT Gadget Distribution. The Company is principally engaged in investment holding activities. The principal activities of the subsidiaries are described in Note 2 Principles of consolidation to the financial statements. The principal place of business of the Company is located 2F-09, Pusat Perdagangan IOI, No. 1 Persiaran Puchong Jaya Selatan, Bandar Puchong Jaya, 47100 Puchong, Selangor.
The Company’s controlling shareholder as of 31 December 2023 was ARB Berhad, a company incorporated in October 1997 in Malaysia and becoming listed on the Main Market of Bursa Malaysia Securities Berhad in February 2004.
On 5 February 2024, ARB Berhad announced that
the distribution-in-specie (the “Distribution-In-Specie”) of
Subsequent to the completion of Distribution-In-Specie,
the Group had ceased to be subsidiaries of ARB Berhad under Malaysia law because ARB Berhad holds
The financial statements are presented in Ringgit Malaysia (“RM”) which is also the functional currency of the Group.
The conversion from Ringgit Malaysia into U.S.
dollars (“USD”) was made at the exchange rate as of 31 December 2023 on which USD
| 2. | SIGNIFICANT ACCOUNTING POLICIES |
This summary provides a list of the significant accounting policies adopted in the preparation of these consolidated financial statements to the extent they have not been disclosed in the other notes below. The policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements are for the Group consisting of ARB IOT Group Limited and its subsidiaries.
Basis for preparation
The consolidated operations and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the six-month period ended 31 December 2023 and 2022 include the results, changes in equity and cash flows of the companies comprising the Group as if the Company had always been the holding company of the Group and the current group structure had been in existence throughout period ended 31 December 2023 and year ended 30 June 2023, or since their respective dates of incorporation, where this is a shorter period.
The consolidated financial statements of ARB IOT Group Limited and its subsidiaries have been prepared on a going concern basis and in accordance with International Financial Reporting Standards (“IFRS”) and interpretations issued by the IFRS Interpretations Committee (“IFRS IC”) applicable to companies reporting under IFRS. The financial statements comply with IFRS as issued by the International Accounting Standards Board (“IASB”).
Historical cost convention
The financial statements have been prepared under the historical cost convention, except for, where applicable, the revaluation of financial assets and liabilities at fair value through profit or loss and other comprehensive income
F-10
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2023
| 2. | SIGNIFICANT ACCOUNTING POLICIES (CONT’D) |
Basis for preparation (Cont’d)
New or amended Accounting Standards and Interpretations adopted
There was no new or amended Accounting Standards and Interpretations issued by the International Accounting Standards Board (“IASB”) that are relevant to the company’s current reporting period. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. The company has not yet assessed the impact of these new or amended Accounting Standards and Interpretations.
Business combinations
Business combinations are accounted for using the acquisition method with assets and liabilities acquired recorded at the acquisition date fair value. The cost of an acquisition is measured as the aggregate of the consideration transferred, which is measured at acquisition date fair value and the amount of any non-controlling interest share (“NCI”) in the acquiree. For each business combination, the Group elects whether to measure NCI in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition related costs are expensed as incurred and included in General and administrative expenses.
Principles of consolidation
Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
Upon loss of control of a subsidiary, the Group’s profit or loss is calculated as the difference between the fair value of the consideration received and of any investment retained in the former subsidiary and the previous carrying amount of the assets (including any goodwill) and liabilities of the subsidiary and any non-controlling interests.
F-11
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2023
| 2. | SIGNIFICANT ACCOUNTING POLICIES (CONT’D) |
Principles of consolidation (Cont’d)
| Ownership Interest in equity | ||||||||||
| Name of company | 31 December 2023 % |
30 June 2023 % |
Principal activities | |||||||
| ARB IOT (M) Sdn. Bhd. | ||||||||||
| ARB IOT Group Sdn. Bhd. | ||||||||||
| Subsidiaries of ARB IOT Group Sdn. Bhd. | ||||||||||
| ARB AI Agro Sdn. Bhd. | ||||||||||
| Subsidiary of ARB AI Agro Sdn. Bhd. | ||||||||||
| ARB Agro Technology Sdn. Bhd. | ||||||||||
| ARB AI Sdn. Bhd. | ||||||||||
| Subsidiary of ARB AI Sdn. Bhd. | ||||||||||
| ARBIOT Sdn. Bhd. | ||||||||||
| ARB Lab Sdn. Bhd. | ||||||||||
| Subsidiaries of ARB Lab Sdn. Bhd. | ||||||||||
| ARB R&D Sdn. Bhd. | ||||||||||
| Subsidiary of ARB R&D Sdn. Bhd. | ||||||||||
| ARB Innovation Sdn. Bhd. | ||||||||||
| ARB R1 Technology Sdn. Bhd | ||||||||||
| ARB Midware Sdn. Bhd. | - | |||||||||
| Subsidiary of ARB Midware Sdn. Bhd. | ||||||||||
| ARB Distribution Sdn. Bhd. | - | |||||||||
| ARB Robotic Sdn. Bhd. | ||||||||||
| Subsidiary of ARB Robotic Sdn. Bhd. | ||||||||||
| ARB Intelligence Sdn. Bhd. | ||||||||||
| ARB Techsymbol Sdn. Bhd. | ||||||||||
| Subsidiaries of ARB Techsymbol Sdn. Bhd. | ||||||||||
| ARB Logistic Technologies Sdn. Bhd. | ||||||||||
| ARB WMS Technologies Sdn. Bhd. | ||||||||||
| ARB 5G Sdn. Bhd. | ||||||||||
| Subsidiary of ARB 5G Sdn. Bhd. | ||||||||||
| ARB Big Data Sdn. Bhd. | ||||||||||
F-12
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2023
| 2. | SIGNIFICANT ACCOUNTING POLICIES (CONT’D) |
Principles of consolidation (Cont’d)
During the financial period, the Group completed the following subscriptions, acquisitions and disposals of companies:
| (1) | On 6 October 2023, ARB IOT Group Sdn. Bhd., an indirect subsidiary of the Company, disposed |
In the previous financial year, the Group completed the following subscriptions, acquisitions, disposals and incorporations of companies:
| (1) | On 17 April 2023, ARB IOT Group Sdn. Bhd., an direct subsidiary of the Company, acquired |
On 27 June 2023, ARB IOT Group Sdn.
Bhd. disposed
| (2) | On 26 May 2023, ARB IOT Group Sdn. Bhd. acquired |
Inter-company transactions, balances and unrealized gains on transactions between Group companies are eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
F-13
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2023
| 2. | SIGNIFICANT ACCOUNTING POLICIES (CONT’D) |
Segmental Information
An operating segment is defined as a component of an entity for which discrete financial information is available and whose operating results are regularly reviewed by the Chief Operating Decision Maker (“CODM”). The CODM is comprised of the Management Board of the Group. The Group operates as two segments dedicated to the provision of hardware and software of Internet of Things solutions and investment holding and others. The CODM makes decisions about allocating resources and assessing performance based on the Group as a whole. Accordingly, the Group has determined it operates in two operating and reportable segments.
Foreign currency translation
The financial statements are presented in Ringgit Malaysia, which is the Company’s presentation currency. The use of USD is solely for the convenience of the reader. All the functional currency of subsidiaries of ARB IOT Group Limited are Ringgit Malaysia.
Foreign currency transactions
Foreign currency transactions are translated into Ringgit Malaysia using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial period exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Non-monetary items are converted at the rate of exchange used to convert the related consolidated statements of financial position items, i.e., at the time of the transaction.
Revenue recognition
Revenues are generally recognized upon the transfer of control of promised products or services provided to our customers, reflecting the amount of consideration we expect to receive for those products or services. We enter into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities.
Revenues are recognized upon the application of the following steps:
| 1 | Identification of the contract or contracts with a customer; |
| 2 | Identification of the performance obligations in the contract; |
| 3 | Determination of the transaction price; |
| 4 | Allocation of the transaction price to the performance obligations in the contract; and |
| 5 | Recognition of revenue when, or as, the performance obligation is satisfied. |
F-14
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2023
| 2. | SIGNIFICANT ACCOUNTING POLICIES (CONT’D) |
Employee benefits
Short-term employee benefits
Wages, salaries, bonuses and social security contributions are recognised as an expense in the year in which the associated services are rendered by employees of the Group and the Company. Short-term accumulating compensated absence such as paid annual leave is recognised when services are rendered by employees and short term non-accumulating compensated absences such as sick leave are recognised when the absences occur.
Defined contribution plan
As required by law, companies in Malaysia make contributions to the Employees’ Provident Fund (“EPF”). The contributions are recognised as a liability after deducting any contribution already paid and as an expense in profit or loss in the period in which the employee render their services. Once the contributions have been paid, the Group and the Company has no further payment obligations.
Income tax
Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss except to the extent that it relates to a business combination or items recognised directly in equity or other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the period, using tax rates enacted or substantively enacted by the end of the reporting period, and any adjustment to tax payable in respect of previous financial year.
Deferred tax is recognised using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities in the statement of financial position and their tax bases. Deferred tax is not recognised for the temporary differences arising from the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax assets and liabilities on a net basis or their tax assets and liabilities will be realised simultaneously.
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at the end of each reporting period and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
F-15
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2023
| 2. | SIGNIFICANT ACCOUNTING POLICIES (CONT’D) |
Impairment of assets
Goodwill is not subject to amortization and is tested annually for impairment or more frequently if events or changes in circumstances indicate it might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized in profit or loss for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use and is calculated with reference to future discounted cash flows that the asset is expected to generate when considered as part of a cash-generating unit. Assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period. If an impairment subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment charge been recognized for the asset in prior years.
Cash and bank balances
For the purposes of presentation in the consolidated statement of cash flows, cash and cash equivalents includes cash in hand, deposits held at call with financial institutions, and, if applicable, other short-term highly liquid investments with original maturities of three months or less.
Trade receivables
Trade receivables are amounts due from customers
for goods sold or services performed in the ordinary course of business. Trade receivables are recognized initially at fair value. The
Group holds trade receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortized
cost, less provision for impairment. If collection is expected in
Trade payables
Trade payables are liabilities for goods and services
provided to the Group prior to the end of the financial period which are unpaid. They are recognized initially at their fair value and
subsequently measured at amortized cost. They are classified as current liabilities if payment is due within
Share capital and reserves
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction from the proceeds of the issue.
F-16
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2023
| 2. | SIGNIFICANT ACCOUNTING POLICIES (CONT’D) |
Fair value hierarchy
Financial instruments are carried at fair value. The different levels used in measuring fair value have been defined in accounting standards as follows:
Level 1 — the fair value of financial instruments traded in active markets is based on quoted market prices at the end of the reporting period.
Level 2 — the fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximize the use of observable market data and as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
Level 3 — if one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.
The Group recognises transfers between levels of the fair value hierarchy as of the date of the event or change in circumstances that caused the transfers.
| 3. | CRITICAL ESTIMATES AND JUDGMENTS |
The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. Management also needs to exercise judgment in applying the Group’s accounting policies.
This note provides an overview of the areas that involved a higher degree of judgment or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be wrong. Detailed information about each of these estimates and judgments is included in other notes together with information about the basis of calculation for each affected line item in the financial statements.
Significant estimates and judgments
Estimates and judgments are continually evaluated. They are based on historical experience and other factors, including expectations of future events that may have a financial impact on the Group and that are believed to be reasonable under the circumstances.
There are no significant areas of estimation uncertainty and critical judgements in applying accounting policies that have significant effect on the amounts recognised in the financial statements other than disclosed in the Note 10 - intangible asset.
F-17
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2023
| 4. | CASH AND BANK BALANCES |
31 December 2023 | 30 June 2023 | |||||||
| RM | RM | |||||||
| Cash and bank balances | ||||||||
| Deposits with license banks | ||||||||
| (a) | Cash and bank balances are classified as financial assets measured at amortised cost. |
| (b) | Included in foreign currency deposit with a licensed bank
of the Group is an amount of RM |
| 5. | TRADE RECEIVABLES |
31 December 2023 | 30 June 2023 | |||||||
| RM | RM | |||||||
| Current | ||||||||
| Trade receivables | ||||||||
| - Third parties | ||||||||
| (a) | Trade receivables are classified as financial assets measured at amortised cost. |
| (b) | Trade receivables are non-interest bearing and the normal credit terms of trade receivables granted by the Group ranged from 30 to 210 days (30.06.2023: 30 to 210 days). Other credit terms are assessed and approved on a case-by-case basis. They are recognised at their original invoices amounts, which represent their fair values on initial recognition. |
| (c) | Impairment for trade receivables that do not contain a significant financing component are recognised based on the simplified approach using the lifetime expected credit losses. |
The Group uses an allowance matrix to measure the expected credit loss of trade receivables from individual customers. Expected loss rates are calculated using the roll rate based on the probability of a receivable progressing through successive stages of delinquency to 210 days past due.
The expected loss rates are based on the historical credit losses experienced by the Group. The historical loss rates are then adjusted for current and forward-looking information on macroeconomic factors affecting the customers of the Group. The Group has identified the base lending rate, unemployment rate, inflation rate and labor force participation as the key macroeconomic factors. Nevertheless, the Group believe that these factors are immaterial for the purpose of impairment calculation for the period/year.
F-18
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2023
| 5. | TRADE RECEIVABLES (CONT’D) |
| (d) | For trade receivables, which are reported net, such impairments are recorded in a separate impairment account with the loss being recognised within administrative expenses in the statements of profit or loss and other comprehensive income. On confirmation that the trade receivable would not be collectable, the gross carrying value of the asset would be written off against the associated impairment. |
Management exercised significant judgments in determining the probability of default by trade receivables and appropriate forward-looking information.
| (e) |
| Gross carrying amount | Total impairment | Net carrying amount | ||||||||||
| RM | RM | RM | ||||||||||
| 31 December 2023 | ||||||||||||
| Current | ||||||||||||
| 30 June 2023 | ||||||||||||
| Current | ||||||||||||
| Past due: | ||||||||||||
| 1 to 30 days | ||||||||||||
| 31 to 120 days | ||||||||||||
| (f) | The Group does not have significant exposure to single customers or to industry groups and does not anticipate the carrying amounts recorded at the end of the reporting period to be significantly different from the values that would eventually be received. |
F-19
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2023
| 6. | OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS |
31 December 2023 | 30 June 2023 | |||||||
| RM | RM | |||||||
| Other receivables | ||||||||
| Deposits | ||||||||
| Prepayments | ||||||||
| Less : Impairment | ||||||||
| Other receivables | ( | ) | ( | ) | ||||
| (a) | Other receivables and deposits are classified as financial assets measured at amortised cost. |
| (b) | Impairment for other receivables are recognised based on the general approach within IFRS 9 using the forward looking expected credit loss model. The methodology used to determine the amount of the impairment is based on whether there has been a significant increase in credit risk since initial recognition of the financial asset. For those in which the credit risk has not increased significantly since initial recognition of the financial asset, twelve month expected credit losses along with gross interest income are recognised. For those in which credit risk has increased significantly, lifetime expected credit losses along with the gross interest income are recognised. For those that are determined to be credit impaired, lifetime expected credit losses along with interest income on a net basis are recognised. |
The Group defined significant increase in credit risk based on payment trends and past due information.
A financial asset is ‘credit impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.
Evidence that a financial asset is credit impaired includes the following observable data:
| (i) | Significant financial difficulties of the debtor; |
| (ii) | It is probable that the debtor will enter bankruptcy or other financial reorganisation; or |
| (iii) | The disappearance of an active market for a security because of financial difficulties. |
The probability of non-payment by other receivables is adjusted by forward looking information as stated in Note 5(c) and multiplied by the amount of the expected loss arising from default to determine the twelve month or lifetime expected credit loss for the other receivables.
| (c) | No expected credit loss is recognised arising from other receivables and deposits as it is negligible. |
F-20
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2023
| 7. | AMOUNT DUE FROM/(TO) RELATED COMPANIES/HOLDING COMPANY |
31 December 2023 | 30 June 2023 | |||||||
| RM | RM | |||||||
| Amount due from related companies | ||||||||
| - trade | ||||||||
| - non-trade | ||||||||
| Amount due to related companies | ||||||||
| - trade | ( | ) | ||||||
| - non-trade | ( | ) | ||||||
| ( | ) | |||||||
| Amount due to holding company | ||||||||
| - non-trade | ( | ) | ||||||
| (a) | Amount due from/(to) related companies and holding company are classified as financial liabilities measured at amortised cost. |
| (b) | The amount due from/(to) related companies and holding company are unsecured, interest free, repayable upon demand and payable with next twelve (12) month. |
| (c) | The maturity profile of the amount due from/(to) related companies and holding company are at the end of the reporting period based on contractual undiscounted repayment obligations is repayable on demand or within one (1) year. |
| 8. | PROPERTY, PLANT AND EQUIPMENT |
31 December 2023 | 30 June 2023 | | ||||||
| RM | RM | |||||||
| Cost | ||||||||
| As at 1 July | ||||||||
| Additional | ||||||||
| Disposal | ( | ) | ||||||
| As at 31 December/30 June | ||||||||
| Accumulated depreciation | ||||||||
| As at 1 July | ( | ) | ( | ) | ||||
| Additional | ( | ) | ( | ) | ||||
| Disposal | ||||||||
| As at 31 December/30 June | ( | ) | ( | ) | ||||
| Net carrying amount | ||||||||
F-21
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2023
| 8. | PROPERTY, PLANT AND EQUIPMENT (CONT’D) |
Computer system and equipment (Cont’d)
| (a) | All items of property, plant and equipment are initially measured at cost. After initial recognition, property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. |
| (b) | Depreciation is calculated to write down the cost of the assets to their residual values on a straight line basis over their estimated useful lives. The estimated useful lives represent common life expectancies applied in the various business segments of the Group. The principal annual rates used are as follows: |
| Computer system and equipment | % |
| 9. | RIGHT-OF-USE ASSET/LEASE LIABILITY |
31 December 2023 | 30 June 2023 | |||||||
| RM | RM | |||||||
| Right-of-use asset | ||||||||
| Cost | ||||||||
| As at 1 July | ||||||||
| Additional | ||||||||
| As at 31 December/30 June | ||||||||
| Accumulated depreciation | ||||||||
| As at 1 July | ( | ) | ( | ) | ||||
| Charge for the period/year | ( | ) | ( | ) | ||||
| As at 31 December/30 June | ( | ) | ( | ) | ||||
| Net carrying amount | ||||||||
F-22
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2023
| 9. | RIGHT OF USE ASSET/LEASE LIABILITY (CONT’D) |
Office space (Cont’d)
31 December 2023 | 30 June 2023 | |||||||
| RM | RM | |||||||
| Lease liability | ||||||||
| As at 1 July | ||||||||
| Addition | ||||||||
| Interest charged | ||||||||
| Payment of: | ||||||||
| - principal | ( | ) | ( | ) | ||||
| - interest | ( | ) | ( | ) | ||||
| ( | ) | ( | ) | |||||
| Net carrying amount | ||||||||
| (a) | The Group lease an office space in the location which it operates. The lease of the office space comprised fixed payment over the lease term. |
| (b) |
The right of use asset is initially measured at cost, which comprise the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date of the lease. After initial recognition, right of use asset is stated at cost less accumulated depreciation and any accumulated impairment losses, and adjusted for any re-measurement of the lease liability.
The right of use asset is depreciated on the straight-line basis over the earlier of the estimated useful lives of the right of use asset or the end of the lease term. The lease terms for office space are two (2) years. |
| (c) | The Group has certain leases of premises and equipment with lease term of twelve (12) months or less, and low value leases of office equipment of and below. The Group applies the “short-term lease” and “lease of low-value-assets” exemptions for these leases. |
31 December 2023 | 31 December 2022 | |||||||
| RM | RM | |||||||
| Administrative expenses: | ||||||||
| - depreciation of right of use asset | ||||||||
| - expense relating to short-term leases | ||||||||
| - expense relating to leases of low-value assets | ||||||||
| Finance costs: | ||||||||
| - interest expense on lease liability | ||||||||
F-23
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2023
| 9. | RIGHT OF USE ASSET/LEASE LIABILITY (CONT’D) |
Office space (Cont’d)
| Weighted average incremental borrowing rate | Within one year | One to five years | Total | |||||||||||||
| % | RM | RM | RM | |||||||||||||
| 31 December 2023 | ||||||||||||||||
| Lease liability | ||||||||||||||||
| 30 June 2023 | ||||||||||||||||
| Lease liability | ||||||||||||||||
| (f) |
The Group leases several assets that include extension and termination options. These are used to maximise operational flexibility in terms of managing the assets used in the Group’s operations. Management determines whether these extension and termination options are reasonably certain to be executed.
As at 31 December 2023, there are no undiscounted potential future rental payments that are not included in the lease term. |
31 December 2023 | 31 December 2022 | |||||||
| RM | RM | |||||||
| Cash flows | ( | ) | ( | ) | ||||
| Non-cash flows | ||||||||
| Accretion of interest | ||||||||
| At the end of the period | ( | ) | ( | ) | ||||
F-24
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2023
| 10. | INTANGIBLE ASSET |
| Supply/Service Agreements | Computer system | Goodwill | Total | |||||||||||||
| RM | RM | RM | RM | |||||||||||||
| 31 December 2023 | ||||||||||||||||
| Cost | ||||||||||||||||
| As at 1 July | ||||||||||||||||
| Additions | ||||||||||||||||
| As at 31 December | ||||||||||||||||
| Accumulated Amortisation | ||||||||||||||||
| As at 1 July | ( | ) | ( | ) | ( | ) | ||||||||||
| Charge for the period | ( | ) | ( | ) | ( | ) | ||||||||||
| As at 31 December | ( | ) | ( | ) | ( | ) | ||||||||||
| Net carrying amount | ||||||||||||||||
| As at 31 December 2023 | ||||||||||||||||
| Supply/Service Agreements | Computer system | Goodwill | Total | |||||||||||||
| RM | RM | RM | RM | |||||||||||||
| 30 June 2023 | ||||||||||||||||
| Cost | ||||||||||||||||
| As at 1 July | ||||||||||||||||
| Additions | ||||||||||||||||
| Disposal | ( | ) | ( | ) | ||||||||||||
| As at 30 June | ||||||||||||||||
| Accumulated Amortisation | ||||||||||||||||
| As at 1 July | ( | ) | ( | ) | ( | ) | ||||||||||
| Charge for the year | ( | ) | ( | ) | ( | ) | ||||||||||
| As at 30 June | ( | ) | ( | ) | ( | ) | ||||||||||
| Net carrying amount | ||||||||||||||||
| As at 30 June 2023 | ||||||||||||||||
F-25
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2023
| 10. | INTANGIBLE ASSET (CONT’D) |
Supply/Service Agreements
Supply Agreement, Service Agreement and the Reseller and Drone Service Agreement (“Supply/Service Agreements”) recognized in a business combination is a contract-based intangible asset at the acquisition date and is initially measure at cost. After initial recognition, Supply/Service Agreement is measured at cost less accumulated amortisation and accumulated impairment losses.
For the purpose of initial cost recognition, The Group had appointed Independent Valuer (“the Valuer”) to value Supply/Service Agreement based on Discounted Cash Flow Valuation Model (“DCF valuation model”), where the Valuer has adopted the mid-point cost of equity (“Ke”) as the discount rate for future cash flows on 3 June 2022.
The initial cost recognition was taken the following basis into consideration:
| (i) |
provision of all-in-one drone services to streamline workflows on farms and plantation which includes but not limited to spraying pest protection solution for a variety of crops for a period of ten (10) years; and
| |
| (ii) | purchase of Multi-Rotor Agricultural unmanned aeril vehicles (“UAV”) manufactured and marketed under the trademark of Guangzhou Xaircraft Technology Co. Ltd (“GXT”) for a period of ten (10) years and Multi-Rotor Agricultural UAVs from others suppliers from other countries. |
| ● | the potential future economic benefits expected to derived from the Reseller and Drone Services Agreement for the next ten (10) years period with an option to renew for another five (5) years; and |
| ● | rationale and prospects of the Subscription. |
The calculation initial cost of Supply/Service Agreement are most sensitive the following assumptions:
| (i) | Revenue and income pursuant to the Reseller and Drone Service Agreement, the Supply Agreement, and the Service Agreement for the period from ten (10) years, which is derived from 2 main sources as follows: |
| ● | Sale of Products – Multi-Rotor Agricultural UAVs | |
| ● | Drone Services – Services of providing all-in-one drone services to streamline workflows on farms and plantations which includes but not limited to spraying pest protection solution for a variety of crops. |
| The selling price per unit of the products are approximately RM5, per unit, inflated by |
| Drone Services provided will be charged at a rate of approximately RM342, per month and shall be inflated by |
The calculation initial cost of Supply/Service Agreement are most sensitive the following assumptions:
| (ii) | There will be no unusual events or transactions that will materially affect the operations or results of DASB. |
| (iii) | There will be no legal proceedings against DASB which will adversely affect the activities or performance of DASB or give rise to any contingent liabilities., which will materially affect the position or business of DASB. |
| (iv) | There will be no adverse effects from weather conditions, industrial accidents or other similar occurrence, climatic diseases, wars, terrorist attacks, and other natural risks, both domestically and internationally, that may affect the operations, income and expenditure of DASB. |
| (v) | DASB meets all the regulations and standards prescribed by the authorities. |
| (vi) | There will be not any substantial impairment to the carrying value of DASB’s non-current assets. |
| (vii) | Pre-tax discount rate of |
F-26
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2023
| 10. | INTANGIBLE ASSET (CONT’D) |
Computer system
Computer system comprise of source codes recognized in a business combination at the acquisition date and source codes purchased from third parties, which were held for use in the production or supply of goods or services to customers. The source codes are initially measure at cost. After initial recognition, source codes are measured at cost less accumulated amortisation and accumulated impairment losses.
Amortisation is calculated to write down the cost
of the assets to their residual values on a straight line basis over their estimated useful lives. The estimated useful lives represent
common life expectancies applied in the various business segments of the Group. The principal annual rates used are
Goodwill
Goodwill recognised in a business combination is an asset at the acquisition date and is initially measured at cost. After initial recognition, goodwill is measured at cost less accumulated impairment losses.
For the purpose of impairment testing, goodwill is allocated to the Group’s CGUs which represent the lowest level within the Group at which the goodwill is monitored for internal management purposes.
The recoverable amounts of the CGUs have been determined based on value in use (“VIU”) calculations. The VIU is calculated using the pre-tax cash flow projections based on financial budgets approved by management covering a five-year period. VIU was determined by discounting the future cash flow generated from the business operation of the CGUs.
The calculations of VIU for the CGUs are most sensitive to the following assumptions:
| (i) | Revenue growth rates |
The forecasted growth rates are determined based on past performance of the CGUs.
| (ii) | Expenses growth rate |
Expenses are projected at annual increase of approximately
| (iii) | Pre-tax discount rates |
Pre-tax discount rate of
| (iv) | Profit margin |
Profit margins are projected based on the historical profit margin achieved or predetermined profit margin for the CGUs.
With regards to the assessment of the value-in-use of the CGU relating to goodwill, no impairment loss was recognised for the intangible assets on consolidation in the previous year as its recoverable value was in excess of its carrying values.
F-27
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2023
| 11. | TRADE PAYABLES |
31 December 2023 | 30 June 2023 | |||||||
| RM | RM | |||||||
| Current | ||||||||
| Trade payables | ||||||||
| - Third parties | ||||||||
| (a) | Trade payables are classified as financial liabilities measured at amortised cost. |
| (b) | Trade payables are non-interest bearing and the normal trade credit terms granted to the Group range from 30 to 210 days. (30.06.2023: 30 to 210 days). |
| (c) | The maturity profile of the trade payables of the Group at the end of the reporting period based on contractual undiscounted repayment obligations is repayable on demand or within one (1) year. |
| 12. | OTHER PAYABLES AND ACCRUALS |
31 December 2023 | 30 June 2023 | |||||||
| RM | RM | |||||||
| Other payables | ||||||||
| Accruals | ||||||||
| (a) | Other payables and accruals are classified as financial liabilities measured at amortised cost. |
| (b) | The maturity profile of the other payables of the Group at the end of the reporting period based on contractual undiscounted repayment obligations is repayable on demand or within one (1) year. |
F-28
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2023
| 13. | DEFERRED TAX LIABILITIES |
31 December 2023 | 30 June 2023 | |||||||
| RM | RM | |||||||
| As at 1 July | ||||||||
| (Reversal)/Recognised in profit or loss | ( | ) | ||||||
| As at 31 December/30 June | ||||||||
31 December 2023 | 30 June 2023 | |||||||
| RM | RM | |||||||
| Excess of net carrying amount over tax written down value of plant and equipment | ||||||||
| Unabsorbed capital allowances | ( | ) | ( | ) | ||||
| Unabsorbed tax loses | ( | ) | ||||||
| Intangible asset | ||||||||
| 14. | SHARE CAPITAL |
| 31 December 2023 | 30 June 2023 | |||||||||||||||
| Number of | Number of | |||||||||||||||
| shares | Amount | shares | Amount | |||||||||||||
| RM | RM | |||||||||||||||
| Issued and fully paid ordinary shares | ||||||||||||||||
| At the beginning of the period/year | ||||||||||||||||
| Issuance of shares | ||||||||||||||||
| As at end of the period/year | ||||||||||||||||
On 19 September 2022, the Company issued
On
April 5 2023, the Company’s ordinary shares commenced trading on the Nasdaq Capital Market under the symbol “ARBB” On
10 April 2023, the Company closed its initial public offering (“IPO”) of
Owners of the Company are entitled to receive dividends as and when declared by the Company and are entitled to one (1) vote per ordinary share at meetings of the Company. All ordinary shares rank pari passu with regard to the residual assets of the Company.
F-29
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2023
| 15. | CAPITAL CONTRIBUTION |
The advance from holding company classified under equity represents amount that is not expected to be repaid in the foreseeable future and effectively represents additional investment into the Company by the holding company.
| 16. | NON-CONTROLLING INTERESTS |
| 31 December 2023 |
30 June 2023 |
|||||||
| RM | RM | |||||||
| Non-controlling interests | ||||||||
| (a) |
| 31 December 2023 | ARB WMS | ARB Distribution | Other individually immaterial subsidiaries | Total | ||||||||||||
| NCI percentage of ownership interest and voting interest (%) | % | % | ||||||||||||||
| Carrying amount of NCI (RM) | ||||||||||||||||
| (Loss)/Profit allocated to NCI (RM) | ( | ) | ||||||||||||||
| Total comprehensive (loss)/ income allocated to NCI (RM) | ( | ) | ||||||||||||||
| 30 June 2023 | ARB Robotic Group | ARB WMS | ARB Distribution | Other individually immaterial subsidiaries | Total | |||||||||||||||
| NCI percentage of ownership interest and voting interest (%) | % | % | ||||||||||||||||||
| Carrying amount of NCI (RM) | ( | ) | ||||||||||||||||||
| 31 December 2022 | ||||||||||||||||||||
| Profit/(Loss) allocated to NCI (RM) | ( | ) | ||||||||||||||||||
| Total comprehensive income/(loss) allocated to NCI (RM) | ( | ) | ||||||||||||||||||
F-30
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2023
| 16. | NON-CONTROLLING INTERESTS (CONT’D) |
| (b) |
| ARB WMS | ||||
| RM | ||||
| 31 December 2023 | ||||
| Assets and liabilities | ||||
| Current assets | ||||
| Current liabilities | ( | ) | ||
| Net assets | ||||
| Results | ||||
| Revenue | ||||
| Loss for the financial period | ( | ) | ||
| Total comprehensive loss | ( | ) | ||
| Cash flows used in operating activities | ( | ) | ||
| Cash flows from/(used in) investing activities | ||||
| Cash flows from/(used in) financing activities | ||||
| Net decrease in cash and cash equivalents | ( | ) | ||
| ARB WMS | ARB Distribution | |||||||
| RM | RM | |||||||
| 30 June 2023 | ||||||||
| Assets and liabilities | ||||||||
| Current assets | ||||||||
| Current liabilities | ( | ) | ( | ) | ||||
| Net assets | ||||||||
| Results | ||||||||
| Revenue | ||||||||
| Profit for the financial year | ||||||||
| Total comprehensive income/(loss) | ( | ) | ||||||
| Cash flows (used in)/from operating activities | ( | ) | ||||||
| Cash flows from investing activities | ||||||||
| Cash flows from financing activities | ||||||||
| Net (decrease)/increase in cash and cash equivalents | ( | ) | ||||||
F-31
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2023
| 16. | NON-CONTROLLING INTERESTS (CONT’D) |
| (c) | Acquisition/Disposal of non-controlling interest |
31 December 2023
On 6 October 2023, ARB IOT Group Sdn.
Bhd., disposed
30 June 2023
On 26 May 2023, the Group had acquired
Other than the above subsidiaries, the controlling equity interest of individually immaterial subsidiaries remain unchanged as at 31 December 2023 and 30 June 2023.
| 17. | REVENUE |
| Six Months Ended | ||||||||
| 31 December 2023 |
31 December 2022 |
|||||||
| RM | RM | |||||||
| Revenue from contracts with customers | ||||||||
| Project management fees | ||||||||
| Sale of goods | ||||||||
| Timing of revenue recognition | ||||||||
| Transferred at a point in time | ||||||||
| (a) | Project management and rendering of information technology system |
Revenue from project management fees and rendering of information technology system are recognised at a point in time when control of the goods is passed to the customer, which is point in time when the significant risks and rewards are transferred to the customer and the transaction has met the probability of inflows and measurement reliability requirements of IFRS 15.
| (b) | Sales of goods |
The Group is engaged in supply and install customised IoT software or hardware. The majority of the sale of goods contracts are supply and install customised a set of IoT Smart Agriculture solution and customised source codes and reseller of mobile gadget and the relevant accessories.
Revenue from sale of goods is recognised at a point in time when the Group satisfies a performance obligation by transferring a promised good (i.e. an asset) to a customer. An asset is transferred as and when a customer obtains control of that asset which coincides with the delivery of goods and acceptance by the customer.
There is no material right of return and warranty provided to the customers on the sale of goods and there is no significant financing component in the revenue arising from sale of goods as the sales are made on the normal credit terms not exceeding twelve months.
| (c) | Dividend income |
Dividend income is recognized when the right to receive dividend payment is established.
F-32
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2023
| 18. | (LOSS)/PROFIT BEFORE TAX |
| Six Months Ended | ||||||||
| 31 December 2023 |
31 December 2022 |
|||||||
| RM | RM | |||||||
| (Loss)/Profit before tax is arrived at after charging: | ||||||||
| Depreciation of: | ||||||||
| - property, plant and equipment | ||||||||
| - right of use assets | ||||||||
| Amortisation of intangible asset | ||||||||
| Directors’ remuneration | ||||||||
| Loss on disposal of subsidiaries | ||||||||
| Rental of premises | ||||||||
| Rental of equipment | ||||||||
| Interest expense of lease liabilities | ||||||||
| And crediting: | ||||||||
| Wavier of debts | ( |
) | ||||||
| Interest income | ( |
) | ( |
) | ||||
| 19. | TAX EXPENSE |
| Six Months Ended | ||||||||
| 31 December 2023 |
31 December 2022 |
|||||||
| RM | RM | |||||||
| Income tax | ||||||||
| - Current period/year provision | ||||||||
| - Under/(Over) provision in prior period | ||||||||
| Deferred tax (Note 13) | ||||||||
| - Relating to origination and reversal of temporary differences | ( |
) | ( |
) | ||||
| - Over provision in prior period | ( |
) | ( |
) | ||||
| ( |
) | ( |
) | |||||
| ( |
) | ( |
) | |||||
Malaysian income tax is calculated at the statutory
tax rate of
F-33
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2023
| 19. | TAX EXPENSE (CONT’D) |
| Six Months Ended | ||||||||
| 31 December 2023 |
31 December 2022 |
|||||||
| RM | RM | |||||||
| (Loss)/Profit before tax (“PBT”) | ( |
) | ||||||
| Tax at Malaysian statutory rate of 24% (31.12.2022: 24%) | ( |
) | ||||||
| Tax effects in respect of: | ||||||||
| Non-allowable expenses | ( |
) | ( |
) | ||||
| Non-taxable income | ||||||||
| Deferred tax assets not recognized | ( |
) | ||||||
| Changes in unrecognized temporary differences | ||||||||
| Utilisation of unrecognized deferred tax assets | ||||||||
| (Over)/Under provision in prior period: | ||||||||
| Income tax | ( |
) | ||||||
| Deferred tax (Note 13) | ||||||||
| Tax expense | ||||||||
| 20. | (LOSS)/EARNINGS PER ORDINARY SHARE (“EPS”) |
| (a) | Basic EPS |
| Six Months Ended | ||||||||
| 31 December 2023 |
31 December 2022 |
|||||||
| (Loss)/Profit attributable to Owners of the Company (RM) | ( |
) | ||||||
| Weighted average number of ordinary shares in issue | ||||||||
| Basic EPS (RM) | ( |
) | ||||||
| (b) | Diluted EPS |
| Six Months Ended | ||||||||
| 31 December 2023 |
31 December 2022 |
|||||||
| (Loss)/Profit attributable to Owners of the Company (RM) | ( |
) | ||||||
| Weighted average number of ordinary shares in issue | ||||||||
| Diluted EPS (RM) | ( |
) | ||||||
F-34
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2023
| 21. | EMPLOYEE BENEFITS |
| Six Months Ended | ||||||||
| 31 December 2023 |
31 December 2022 |
|||||||
| RM | RM | |||||||
| Salaries, wages, bonuses and allowances | ||||||||
| Defined contribution plans | ||||||||
| Social security contributions | ||||||||
| Other employee benefits | ||||||||
| 22. | OPERATING SEGMENTS |
The Group’s businesses are organised into business units based on their products and services provided. The performance of each segment is measured based on the internal management report reviewed by Chief Operating Decision Maker. The Group business segments as follow:
| (a) | Internet of Things (“IoT”) |
| (b) | Investment holding and others |
Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment.
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. The inter-segment transactions have been entered into at arms-length with terms mutually agreed between the segments and have been eliminated to arrive at the Group’s results.
| (a) | Business segments |
| As of 31 December 2023 | ||||||||||||
| IoT | Investment holding and others | Total | ||||||||||
| RM | RM | RM | ||||||||||
| Assets | ||||||||||||
| Segment assets | ||||||||||||
| Deferred tax assets and tax recoverable | ||||||||||||
| Total assets | ||||||||||||
| Liabilities | ||||||||||||
| Segment liabilities | ||||||||||||
| Deferred tax liabilities and tax payable | ||||||||||||
| Total liabilities | ||||||||||||
F-35
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2023
| 22. | OPERATING SEGMENTS (CONT’D) |
| (a) | Business segments (Cont’d) |
The following table provides an analysis of the Group’s revenue, results, assets, liabilities and other information by business segment: (Cont’d)
| As of 31 December 2023 (Cont’d) | ||||||||||||
| IoT | Investment holding and others | Total | ||||||||||
| RM | RM | RM | ||||||||||
| Additions to non-current assets: | ||||||||||||
| Property, plant and equipment | ||||||||||||
| Six Months Ended 31 December 2023 | ||||||||||||
| Revenue | ||||||||||||
| Total revenue | ||||||||||||
| - Inter-segment revenue | ||||||||||||
| Revenue from external parties | ||||||||||||
| Results | ||||||||||||
| Loss before interest, depreciation and tax | ( | ) | ( | ) | ( | ) | ||||||
| Depreciation of: | ||||||||||||
| - property, plant and equipment | ( | ) | ( | ) | ||||||||
| - right-of-use assets | ( | ) | ( | ) | ||||||||
| Amortisation of intangible asset | ( | ) | ( | ) | ||||||||
| Finance income/(cost), Net | ||||||||||||
| Loss before tax | ( | ) | ( | ) | ( | ) | ||||||
| Tax expense | ( | ) | ||||||||||
| Loss for the period | ( | ) | ( | ) | ( | ) | ||||||
| As of 30 June 2023 | ||||||||||||
| IoT | Investment holding and others | Total | ||||||||||
| RM | RM | RM | ||||||||||
| Assets | ||||||||||||
| Segment assets | ||||||||||||
| Deferred tax assets and tax recoverable | ||||||||||||
| Total assets | ||||||||||||
| Liabilities | ||||||||||||
| Segment liabilities | ||||||||||||
| Deferred tax liabilities and tax payable | ||||||||||||
| Total liabilities | ||||||||||||
F-36
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2023
| 22. | OPERATING SEGMENTS (CONT’D) |
| (a) | Business segments (Cont’d) |
As of 30 June 2023 (Cont’d)
| IoT | Investment holding and others | Total | ||||||||||
| RM | RM | RM | ||||||||||
| Additions to non-current assets: | ||||||||||||
| Property, plant and equipment | ||||||||||||
| Six Months Ended 31 December 2022 | ||||||||||||
| Revenue | ||||||||||||
| Total revenue | ||||||||||||
| Inter-segment revenue | ||||||||||||
| Revenue from external parties | ||||||||||||
| Results | ||||||||||||
| Profit/(Loss) before interest, depreciation and tax | ( | ) | ||||||||||
| Depreciation of: | ||||||||||||
| - property, plant and equipment | ( | ) | ( | ) | ||||||||
| - right-of-use assets | ( | ) | ( | ) | ||||||||
| Amortisation of intangible asset | ( | ) | ( | ) | ||||||||
| Finance income/(cost), Net | ||||||||||||
| Profit/(Loss) before tax | ( | ) | ||||||||||
| Tax expense | ( | ) | ||||||||||
| Profit/(Loss) for the period | ( | ) | ||||||||||
| (b) | Geographical segments |
The Group operates predominantly in Malaysia and revenue from overseas is insignificant. Accordingly, the information by geographical segment is not presented.
F-37
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2023
| 23. | RELATED PARTY DISCLOSURES |
| (a) | Identification of related parties |
Parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group and the party are subject to common control or common significant influence. Related parties may be individuals or other entities.
Related parties also include Key Management Personnel defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group either directly or indirectly. The Key Management Personnel include all the Directors of the Group.
The Group has related party relationship with its subsidiaries, related companies, Directors and companies in which Directors of the Group have interest.
| (b) |
| Six Months Ended | ||||||||
| 31 December 2023 |
31 December 2022 |
|||||||
| RM | RM | |||||||
| Related companies | ||||||||
| - Rendering of information technology system services fee | ||||||||
| - Site support and maintenance services fee | ||||||||
| - Project management fee income | ||||||||
| - Project management fee expenses& | ( |
) | ||||||
| Related parties | ||||||||
| - Rendering of information technology system | ||||||||
| - Renovation work | ||||||||
| - Rental paid | ( |
) | ( |
) | ||||
| & | Other than the above management fee, ARB Berhad’s subsidiaries out of the Group had provided specific project management services to the Group. The common cost majority comprise of IT technical staff payroll including remuneration, defined contribution plan, social security contribution and other employee benefit. Followed by upkeep of computer system, depreciation of property, plant and equipment and other expenses. |
The related party transactions described above were carried out on agreed contractual terms and conditions and in the ordinary course of business between the related parties of the Group.
F-38
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2023
| 23. | RELATED PARTY DISCLOSURES (CONT’D) |
| (c) | Compensation of key management personnel |
The key management personnel comprise the Directors of the Group and their remuneration during the financial year are disclosed in Note 21 to the financial statements.
Dato Sri Liew Kok Leong is the Executive Director of the Group. He is also both the Chief Executive Officer and Executive Director of ARB Berhad.
Dato Sri Liew Kok Leong resigned from his positions as Chief Executive Officer and Executive Director of ARB Berhad on 28 December 2023.
| 24. | RISK MANAGEMENT OVERVIEW |
The overall financial risk management objective of the Group is to optimise its shareholders value and not to engage in speculative transactions.
The Group is exposed mainly to market risk (which comprises interest rate risk), credit risk and liquidity and cash flow risk arising from their business activities.
| (a) | Market risk: Interest rate risk |
Interest rate risk is the risk that the fair value or future cash flows of the financial instruments of the Group and of the Company will fluctuate because of changes in market interest rates. The exposure to market risk of the Group for changes in interest rates relates primarily to the deposits placed with licensed banks of the Group.
Sensitivity analysis for interest rate risk
The Group is not exposed to interest rate risk as the interest-bearing financial instruments carry fixed interest rates. As such, sensitivity analysis is not disclosed.
| (b) | Credit risk |
Exposure to credit risk arises mainly from sales made on credit terms. The Group controls the credit risk on sales by ensuring that its customers have sound financial position and credit history. The Group also seeks to invest cash assets safely and profitably with approved financial institutions in line with the policy of the Group.
Exposure to credit risk
At the end of each reporting period, the maximum exposure to credit risk of the Group and of the Company is represented by the carrying amount of each class of financial assets recognised in the statements of financial position. Information regarding credit enhancement for trade and other receivables is disclosed in Notes 5 and 6 respectively.
| (a) | Credit risk concentration profile |
The credit risk concentration profile has been disclosed in Note 5.
| (b) | Liquidity and cash flow risk |
Liquidity and cash flow risks are the risks that the Group and the Company will not be able to meet their financial obligation when they are fall due. The exposure of the Group and of the Company to liquidity risk are principally from their payable and lease liabilities.
The Group actively manages its debt maturity profile, operating cash flows and the availability of funding so as to ensure that all operating, investing and financing needs are met. In executing its liquidity risk management strategy, the Group measures and forecasts its cash commitments and maintains a level of cash and cash equivalents deemed adequate to finance the activities of the Group.
The analysis of financial instruments by remaining contractual maturities has been disclosed in Notes 11 and 12 to the financial statements respectively.
F-39
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2023
| 25. | BUSINESS COMBINATION/DISPOSAL OF SUBSIDIARIES |
| (a) | Acquisition of equity interest in subsidiaries |
30 June 2023
In the previous year, there were acquisitions of ARB Synergy Sdn. Bhd. (“ARB Synergy”) and its subsidiary, namely ARB Databook Pte. Ltd. (“ARB Databook”), collectively as Synergy Group.
| ARB Synergy Group | ||||
| RM | ||||
| Fair value consideration for the acquisitions | ||||
| Less: Cash and cash equivalents of subsidiaries acquired | ( | ) | ||
| Cash outflow from acquisition of subsidiaries | ( | ) | ||
| ARB Synergy | ||||
| Group | ||||
| RM | ||||
| Cash and bank balances | ||||
| Other receivables | ||||
| Other payables and accruals | ( | ) | ||
| Net liabilities | ( | ) | ||
| Non-controlling interests measured at fair value | ||||
| Group’s share of net assets | ( | ) | ||
| Add: Goodwill on consolidation | ||||
| Total fair value of consideration for the acquisitions | ||||
The fair value of the non-controlling interest represents its share of the fair value of subsidiaries at the acquisition date, estimated using the purchase price allocation method. The bargain purchase on business combination is not taxable for tax purpose.
| ARB Synergy | ||||
| Group | ||||
| RM | ||||
| Revenue | ||||
| Loss before tax | ( | ) | ||
| Loss for the period | ( | ) | ||
F-40
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2023
| 25. | BUSINESS COMBINATION/DISPOSAL OF SUBSIDIARIES (CONT’D) |
| (b) | Disposal of equity interest in subsidiaries |
31 December 2023
During the financial period, there are disposal ARB Midware Sdn. Bhd. and its subsidiary, ARB Distribution Sdn. Bhd. (“ARB Midware Group”).
| ARB Midware | ||||
| Group | ||||
| RM | ||||
| Cash proceed | ||||
| Less: Cost of investment in subsidiaries | ( | ) | ||
| Gain/(Loss) on disposal of subsidiaries at subsidiaries’ company level | ||||
| Post-acquisition reserves recognized up to the date of disposal | ( | ) | ||
| ( | ) | |||
| Realisation of foreign currency translation gain reclassified from reserve | ||||
| Loss on disposal of subsidiaries at the Group level | ( | ) | ||
| ARB Midware | ||||
| Group | ||||
| RM | ||||
| Trade receivables | ||||
| Other receivables, prepayments and deposits | ||||
| Cash and bank balances | ||||
| Trade payables | ( | ) | ||
| Other payables and accruals | ( | ) | ||
| Tax payables | ( | ) | ||
| Non-controlling interest | ( | ) | ||
| Add: Goodwill | ||||
| Loss on disposal of subsidiaries at the Group level | ( | ) | ||
| Net disposal proceeds | ||||
| Cash and cash equivalents of subsidiaries disposed | ( | ) | ||
| Net cash outflow upon disposal of subsidiaries | ( | ) | ||
F-41
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2023
| 25. | BUSINESS COMBINATION/DISPOSAL OF SUBSIDIARIES (CONT’D) |
| (b) | Disposal of equity interest in subsidiaries (Cont’d) |
30 June 2023
In the previous year, there was disposal of ARB Synergy Sdn. Bhd. and its subsidiary, ARB Databook Pte. Ltd..
| ARB Synergy | ||||
| Group | ||||
| RM | ||||
| Cash proceed | ||||
| Less: Cost of investment in subsidiaries | ( | ) | ||
| Gain on disposal of subsidiaries at subsidiaries’ company level | ||||
| Pre-acquisition reserves recognized upon acquisition | ( | ) | ||
| Post-acquisition reserves recognized up to the date of disposal | ||||
| Realisation of foreign currency translation gain reclassified from reserve | ( | ) | ||
| Gain on disposal of subsidiaries at the Group level | ||||
| ARB Synergy | ||||
| Group | ||||
| RM | ||||
| Other receivables, prepayments and deposits | ||||
| Cash and bank balances | ||||
| Other payables and accruals | ( | ) | ||
| ( | ) | |||
| Realisation of foreign currency translation gain reclassified from reserve | ||||
| ( | ) | |||
| Add: Goodwill | ||||
| ( | ) | |||
| Gain on disposal of subsidiaries at the Group level | ||||
| Net disposal proceeds | ||||
| Cash and cash equivalents of subsidiaries disposed | ( | ) | ||
| Net cash outflow upon disposal of subsidiaries | ( | ) | ||
F-42
ARB IOT GROUP LIMITED
(Incorporated in Cayman Islands)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2023
| 26. | SIGNIFICANT EVENT DURING THE REPORTING PERIOD |
On 5 February 2024, ARB Berhad announced
that the Distribution-In-Specie of
Subsequent to the completion of Distribution-In-Specie,
the Group had ceased to be subsidiaries of ARB Berhad under Malaysia law because ARB Berhad holds
F-43
Exhibit 99.2
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
IN CONNECTION WITH THE INTERIM CONSOLIDATED
FINANCIAL STATEMENTS FOR THE
SIX MONTHS ENDED DECEMBER 31, 2023
The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited condensed consolidated financial statements and the notes thereto and other financial information, which are included elsewhere in this report on Form 6-K.
This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those identified elsewhere in this report on Form 6-K, and those listed in the annual report on Form 20-F for the fiscal year ended June 30, 2023 (the “2023 Form 20-F”) under “Item 3.D. Risk Factors” or in other parts of the 2023 Form 20-F.
Overview
We are a provider of complete solutions to our clients for the integration of Internet of Things (“IoT”) systems and devices from designing to project deployment. We offer a wide range of IoT systems as well as provide customers a substantial range of services such as system integration and system support service. We deliver holistic solutions with full turnkey deployment including designing, installation, testing, pre-commissioning, and commissioning of various IoT systems and devices as well as integration of automated systems, including installation of wire and wireless and mechatronic works.
Recent new technology trends such as artificial intelligence (“AI”), cloud computing, 5G, robotic process automation (“RPA”), IoT and hyper-connectivity continue to transform businesses and drive companies to seek digital changes to meet evolving demands of customers.
We reorganized our operations into three business lines for the six months ended December 31, 2023. In light of significant declines in activity and revenue within our IoT Smart Agriculture and IoT System Development sectors, we have merged these two into a single, streamlined business line.
| ● | IoT Smart Home & Building. We offer smart home solutions which include design, procurement and provision of smart home products and devices, integration services as well as comprehensive professional electrical wire installation and home data network setup for homeowners. We also provide smart building solutions which include design, procurement, installation, testing, pre-commissioning and commissioning of various IoT systems, solutions and devices as well as integration of automated systems for smart buildings, including installation of wire and wireless and mechatronic works for property developers and contractors. | |
| ● | IoT Gadget Distribution. We distribute mobile gadget accessories to end users in Malaysia via resellers, distributors and retailers. In the process, we provide certain services including shipping tracking and status updates, customer care line and online chat support, digital marketing, pre-installation and warranty services. This business line was disposed of since October 2023 with the sale of our former subsidiaries, ARB Midware Sdn. Bhd. and ARB Distribution Sdn. Bhd. on October 6, 2023. We disposed of this business line because of its insignificant profit generation. |
| ● | IoT Smart Agriculture and System Development. We carry out services of system development, supply, installation, commissioning and testing of smart systems which include IoT concept and functionality to the existing systems across all industries. |
Recent Developments
Our former parent company, ARB Berhad, a public company listed on the Main Market of Bursa Malaysia Securities Berhad and previously holding approximately 94.56% of our issued and outstanding Ordinary Shares, effected a distribution of 17,496,142 Ordinary Shares it held in us, to its shareholders on February 5, 2024 (the “Distribution”). Following the Distribution, ARB Berhad continues to hold 7,503,858 Ordinary Shares of our company, or approximately 28.38% of our issued and outstanding Ordinary Shares. Management of both our company and ARB Berhad believed that the Distribution would benefit the shareholders of ARB Berhad since the shareholders of ARB Berhad would be able to increase or decrease their level of participation in our business by varying their level of investment in us separate from ARB Berhad, and would benefit our shareholders by increasing the number of holders of our Ordinary Shares, which our management believed could enhance the liquidity of our Ordinary Shares. Following the Distribution, we are no longer deemed a “controlled company” under the Nasdaq Rules, and we are no longer included in ARB Berhad’s consolidated group for Malaysian income tax, accounting or public company reporting purposes.
Principal Factors Affecting Our Financial Performance
Our business, results of operations and financial condition are affected by general factors driving Malaysia’s economy, the IoT industry, and the markets where our customers operate such as property development, agriculture, logistics and consumer electronics sectors. These factors include urbanization rate, levels of per capita disposable income, levels of consumer spending, rate of internet and mobile penetration, development of technologies such as 5G and cloud computing, domestic and international supply chain stability, overall enterprise spending, and other general economic conditions in Malaysia that affect consumption and business activities in general.
Our operating results are more directly affected by the following factors:
Our ability to secure IoT projects. The operations of our IoT Smart Home and Building, and IoT Smart Agriculture and System Development business lines are on a project-by-project basis. While we are still in the early stages of penetrating our addressable market, we have benefited from rapid customer growth. In 2023, we shifted the IoT Smart Agriculture’s revenue model from one-off sales to recurring income. We now generate income by offering our systems to customers on a profit-sharing basis, in contrast with the previous model of one-off sales. Although this has led to a revenue decrease in the short term, the new model allows us to price our systems more competitively. We also engage in the services of system development, supply, installation, commissioning and testing of smart systems that include IoT concept and functionality onto existing systems across all industries. We believe there are significant untapped opportunities to collaborate with large enterprises across different industries in Malaysia and the ASEAN region. In addition to large enterprises, we also seek to work with smaller, fast-growing companies that require a different set of services that allow us to test new offerings and develop new capabilities.
Our customers’ financial condition and ability to make payments. Our customers generally purchase our products on credit, and as a result, our results of operations and financial condition may be adversely affected if our customers experience financial difficulties. We provide a long credit period from 30 days to 210 days to some large customers to secure contracts from them. Although we had significant amounts of accounts receivable as of June 30, 2023 and 2022, we were able to collect all of such accounts receivable subsequently. We manage credit risk related to our customers by performing periodic evaluations of credit worthiness and applying other credit risk monitoring procedures.
Our ability to complete IoT projects and develop system on schedule. All of our projects have agreed milestones and specific completion dates. Our ability to meet agreed milestones depends on our ability to manage overall projects as well as product sourcing and supply chain. We source hardware and software products for our IoT projects from Malaysian suppliers. Proximity to origin enables us to develop stronger relationships with local suppliers and contractors, which gives us access to a stable supply of products and services. In addition, we lay out specific and measurable metrics in advance and remain focused and disciplined through the life of the projects which enable us to promptly identify any underlying issues and resolve them proactively. We believe that our strong project management ability and procedures are key to ensuring a high level of completion rate.
In addition, other significant factors affecting our performance and results of our operations include:
| ● | The global macroeconomy | |
| ● | Wage rates and operating costs in Malaysia | |
| ● | Changes in foreign exchange rates, particularly fluctuations in exchange rate between the U.S. dollar and the Ringgit Malaysia | |
| ● | Our ability to retain existing clients, as well as to increase our revenue from existing clients by expanding services provided to them | |
| ● | Our ability to provide favorable pricing | |
| ● | Our ability to expand and deepen the quality, range and diversity of our portfolio of service offerings while maintaining high quality standards | |
| ● | Our ability to maintain and strengthen a strong brand and corporate reputation | |
| ● | Our ability to continuously innovate, and continuously remain at the forefront of emerging technologies and related market trends | |
| ● | Our ability to identify, integrate and effectively manage future acquisitions |
Our Reportable Segments
An operating segment is defined as a component of an entity for which discrete financial information is available and whose operating results are regularly reviewed by our Chief Executive Officer. We report our results of operations in two reportable segments dedicated to (i) the provision of hardware and software of Internet of Things solutions and (ii) investment holding and others. The Chief Executive Officer makes decisions about allocating resources and assessing performance based on the Company as a whole. We provide breakdowns by business lines for certain components of our operating results as appropriate.
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Key Components of Results of Operations
Revenue
Our revenue consists of (i) project management fees, (ii) sales of goods, and (iii) rendering of information technology system.
Revenue from project management and rendering of information technology system are recognized at a point in time when control of the goods is passed to the customer, which is the point in time when the significant risks and rewards are transferred to the customer and the transaction has met the probability of inflows and measurement reliability requirements of IFRS 15.
Revenue from sale of goods is recognized at a point in time when the Group satisfies a performance obligation by transferring a promised good (i.e. an asset) to a customer. An asset is transferred as and when a customer obtains control of that asset which coincides with the delivery of goods and acceptance by the customer. There is no material right of return and warranty provided to the customers on the sale of goods and there is no significant financing component in the revenue arising from sale of goods as the sales are made on the normal credit terms not exceeding twelve months.
We carry out services of system development, supply, installation, commissioning and testing of smart systems which includes IoT concept and functionality to the existing systems across all industries. The majority of the sale of goods contracts relate to the sale of customized source codes and IoT solutions in accordance with client requirements for IoT Smart Agriculture and System Development, as well as resale of mobile gadgets and accessories.
Cost of Revenue
Cost of Project Management and Rendering of Information Technology System Revenue
Cost of project management and rendering of information technology system revenue primarily consist of costs related to providing implementation and configuration services, personnel-related costs directly associated with our professional services, including costs of contracted third-party vendors.
Cost of Sales of Goods
Cost of sales of goods mainly consists of cost of products purchased from third party suppliers.
Total Expenses
Total expenses consist of depreciation expenses, personnel expenses, general administrative expenses, other operating expenses and interest expense of lease liabilities.
The plant and equipment were depreciated over 3 years based on the Company’s depreciation policy.
Other Income
Other Income mainly consists of bank interest income.
Tax Expenses
Malaysian income tax is calculated at the statutory tax rate of 24% regarding the estimated taxable profit for the fiscal years.
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Results of Operations
The following table sets forth key components of our results of operations for the six months ended December 31, 2023 and 2022.
| For the six months ended December 31, | Change | |||||||||||||||||||||||||||
| 2023 (in thousands) | 2022 (in thousands) | Amount (in thousands) | Amount (in thousands) | % | ||||||||||||||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||||||||||||||
| RM | USD | RM | USD | RM | USD | |||||||||||||||||||||||
| Revenue | 31,623 | $ | 6,882 | 123,521 | $ | 27,990 | (91,898 | ) | $ | (21,108 | ) | (74.4 | ) | |||||||||||||||
| Cost of revenue | (49,204 | ) | (10,708 | ) | (108,687 | ) | (24,629 | ) | 59,483 | 13,921 | 54.7 | |||||||||||||||||
| Gross (loss)/profit | (17,581 | ) | (3,826 | ) | 14,834 | 3,361 | (32,415 | ) | (7,187 | ) | (218.5 | ) | ||||||||||||||||
| Total expenses | (46,216 | ) | (10,058 | ) | (12,629 | ) | (2,861 | ) | (33,587 | ) | (7,197 | ) | (266.0 | ) | ||||||||||||||
| Other income | 1,004 | 219 | 222 | 50 | 782 | 169 | 352.3 | |||||||||||||||||||||
| (Loss)/profit before tax | (62,793 | ) | (13,665 | ) | 2,427 | 550 | (65,220 | ) | (14,215 | ) | (2,687.3 | ) | ||||||||||||||||
| Tax expenses | 12,927 | 2,813 | 2,506 | 568 | 10,421 | 2,245 | 415.8 | |||||||||||||||||||||
| (Loss)/Profit for the financial period | (49,866 | ) | (10,852 | ) | 4,933 | 1,118 | (54,799 | ) | (11,970 | ) | (1,110.9 | ) | ||||||||||||||||
| Other comprehensive (loss)/income for the financial period, net of tax | ||||||||||||||||||||||||||||
| Item that may be reclassified subsequently to profit or loss: | ||||||||||||||||||||||||||||
| Exchange differences arising on translation of foreign operation | 3,070 | 668 | (11 | ) | (3 | ) | 3,081 | 671 | 2,8009.1 | |||||||||||||||||||
| Total comprehensive (loss)/income for the period | (46,796 | ) | $ | (10,184 | ) | 4,922 | $ | 1,115 | (51,718 | ) | $ | (11,299 | ) | (1,050.8 | ) | |||||||||||||
Revenue
For the six months ended December 31, 2023, the revenue decreased by RM91.9 million ($21.1 million) or 74.4% to RM31.6 million ($6.9 million), when compared with RM123.5 million ($28.0 million) for the six months ended December 31, 2022. The decrease was primarily due to the shift in the IoT Smart Agriculture’s revenue model from one-off sales to recurring income in 2023. We now generate income from the IoT Smart Agriculture by offering our systems to customers on a profit-sharing basis, in contrast with the previous model of one-off sales. Although this has led to a revenue decrease in the short term, the new model allows us to price our systems more competitively and will provide more consistent and staggered revenue.
The following table sets forth the breakdown of our revenue by business lines.
| For the six months ended December 31, | ||||||||||||||||
2023 | 2022 | |||||||||||||||
| RM | USD | RM | USD | |||||||||||||
| IoT Smart Home and Building | 470 | $ | 102 | 2,500 | $ | 567 | ||||||||||
| IoT Gadget Distribution | 5,717 | 1,244 | 9,821 | 2,225 | ||||||||||||
| IoT Smart Agriculture and System Development | 25,436 | 5,536 | 111,200 | 25,198 | ||||||||||||
| Total | 31,623 | $ | 6,882 | 123,521 | $ | 27,990 | ||||||||||
Revenue from IoT Smart Home and Building amounted to RM0.47 million ($0.1 million) for the six months ended December 31, 2023, from RM2.5million ($0.6 million) for the six months ended December 31, 2022, a decrease of RM2.0 million ($0.5 million) or 81.2%. The decrease was primarily attributed to diminished sales performance for the six months ended December 31, 2023.
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Revenue from IoT Gadget Distribution amounted to RM5.7 million ($1.2 million) for the six months ended December 31, 2023, from RM9.8 million ($2.2 million) for the six months ended December 31, 2022, a decrease of RM4.1 million ($1.0 million) or 41.8%. This business line was disposed of since October 2023 with the sale of our former subsidiaries, ARB Midware Sdn. Bhd. and ARB Distribution Sdn. Bhd. on October 6, 2023. We disposed of this business line because of its insignificant profit generation. The decrease in revenue was primarily due to the IoT Gadget Distribution business line generating revenue for only three months before its disposition, as compared to the previous period where revenue was generated for the full six months ended December 31, 2022.
Revenue from IoT Smart Agriculture and System Development recorded RM25.4 million ($5.5 million) for the six month ended December 31, 2023, as compared to RM 111.2 million ($25.2 million) for the six months ended December 31, 2022. The decrease of RM85.8 million ($19.7 million) or 77% was due to the shift in the IoT Smart Agriculture’s business model from one-off sales to recurring income in 2023. We now generate income from the IoT Smart Agriculture by offering our systems to customers on a profit-sharing basis, in contrast with the previous model of one-off sales. Although this has led to a revenue decrease in the short term, the new model allows us to price our systems more competitively and will provide more consistent and staggered revenue.
Cost of Revenue
For the six months ended December 31, 2023, the cost of revenue decreased by RM59.5 million ($13.9 million) or 54.7% to RM49.2 million ($10.7 million), when compared with RM108.7 million ($24.6 million) for the six months ended December 31, 2022, which was in line with the decrease in revenue. The cost of revenue included amortisation of intangible assets of approximately RM20.4 million ($4.4 million) and RM9.9 million ($2.2 million) for the six months ended December 31, 2023 and 2022, respectively.
| For the six months ended December 31, | ||||||||||||||||
| 2023 (in thousands) | 2022 (in thousands) | |||||||||||||||
| RM | USD | RM | USD | |||||||||||||
| IoT Smart Home and Building | 300 | 65 | 3,785 | 858 | ||||||||||||
| IoT Gadget Distribution | 4,532 | 986 | 7,768 | 1,760 | ||||||||||||
| IoT Smart Agriculture and System Development | 44,372 | 9,657 | 97,134 | 22,011 | ||||||||||||
| Total | 49,204 | $ | 10,708 | 108,687 | $ | 24,629 | ||||||||||
Other income
For the six months ended December 31, 2023, the other income increased by RM0.8 million ($0.2 million) or 352% to RM1.0 million ($0.2 million), when compared with RM0.2 million ($0.05 million) for the six months ended December 31, 2022, mainly due to the increase of interest income received during the six months ended December 31, 2023.
| For the six months ended December 31, | ||||||||||||||||
| 2023 (in thousands) | 2022 (in thousands) | |||||||||||||||
| RM | USD | RM | USD | |||||||||||||
| Interest | 829 | 180 | 222 | 50 | ||||||||||||
| Others | 175 | 39 | - | - | ||||||||||||
| Total | 1,004 | $ | 219 | 222 | $ | 50 | ||||||||||
Total expenses
For the six months ended December 31, 2023, the total expenses increased by RM33.6 million ($7.2 million) or 266% to RM46.2 million ($10.0 million), when compared with RM12.6 million ($2.9 million) for the six months ended December 31, 2022, mainly due to the increase in depreciation of plant and equipment during the six months ended December 31, 2023.
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| For the ended December 31, | ||||||||||||||||
| 2023 (in thousands) | 2022 (in thousands) | |||||||||||||||
| RM | USD | RM | USD | |||||||||||||
| Depreciation | 39,974 | $ | 8,698 | 7,349 | $ | 1,665 | ||||||||||
| Amortization | 1,593 | 347 | 1,593 | 361 | ||||||||||||
| Personnel | 3,134 | 682 | 1,652 | 374 | ||||||||||||
| General administrative | 1,203 | 263 | 2,033 | 461 | ||||||||||||
| Other operating expenses | 306 | 67 | - | - | ||||||||||||
| Finance cost | 6 | 1 | 2 | - | ||||||||||||
| Total | 46,216 | $ | 10,058 | 12,629 | $ | 2,861 | ||||||||||
Tax expenses
For the six months ended December 31, 2023, there was an income tax recovery of RM12.9 million ($2.8 million) as compared to income recovery of RM2.5 million ($0.6 million) for the six months ended December 31, 2022. The increased in the income tax recovery was mainly due to over-provision of deferred tax expense in the prior year, as well as utilisation of capital allowance and unabsorbed business losses carried forward from the prior years.
(Loss)/Profit for the financial period
For the six months ended December 31, 2023, the profit decreased by RM54.8 million ($12.0 million) or 1,111% to a loss of RM49.9 million ($10.9 million), when compared with a profit of RM4.9 million ($1.1 million) for the six months ended December 31, 2022. The decrease was mainly due to the following reasons:
| (i) | The shift in the IoT Smart Agriculture’s business model from one-off sales to recurring income in 2023. We now generate income from the IoT Smart Agriculture by offering our systems to customers on a profit-sharing basis, in contrast with the previous model of one-off sales. Although this has led to a revenue decrease in the short term, the new model allows us to price our systems more competitively and will provide more consistent and staggered revenue; |
| (ii) | Significant increase in the depreciation expenses for plant and equipment during the six months ended December 31, 2023; and |
| (iii) | Significant increase in amortisation expenses for intangible assets, despite lower revenue recognised during the six months ended December 31, 2023. |
Liquidity and Capital Resources
As of December 31, 2023 and June 30, 2023, we had cash and bank balances of RM53.6 million ($11.7 million) and RM56.2 million ($12.0 million) respectively.
The following table sets forth a summary of our cash flows for the presented periods:
| For the six months ended | ||||||||||||||||
| December 31, 2023 (in thousands) | December 31, 2022 (in thousands) | |||||||||||||||
| RM | USD | RM | USD | |||||||||||||
| Net cash generated from operating activities | 80,057 | $ | 17,422 | 48,095 | $ | 10,898 | ||||||||||
| Net cash used in investing activities | (29,034 | ) | (6,318 | ) | (72,384 | ) | (16,402 | ) | ||||||||
| Net cash (used in)/generated from financing activities | (55,466 | ) | (12,071 | ) | 29,728 | 6,736 | ||||||||||
| Effect of currency translation | 3,070 | 668 | (11 | ) | (3 | ) | ||||||||||
| Net (decrease)/increase in cash and cash equivalent | (4,443 | ) | $ | (967 | ) | 5,439 | $ | 1,232 | ||||||||
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Operating Activities
The cash generated from operating activities of RM80.0 million ($17.4 million) for the six months ended December 31, 2023, compared to cash generated from operating activities of RM48.1 million ($10.9 million) for the six months ended December 31, 2022. The increase in cash generated from operating activities was primarily due to the improvement in collection of receivables.
Investing Activities
The cash used in investing activities for the six months ended December 31, 2023 amounted to RM29.0 million ($6.3 million) compared to cash used in investing activities of RM72.3 million ($16.4 million) for the six months ended December 31, 2022. The change in investing activities was primarily driven by a higher amount of plant and equipment acquisitions for the preceding six months ended December 31, 2022.
Financing Activities
The cash used in financing activities for the six months ended December 31, 2023 amounted to RM55.4 million ($12.0 million) compared to cash generated from financing activities for the six months ended December 31, 2022 of RM29.7 million ($6.7million). The change in financing activities was mainly attributed to the repayment to related companies and holding company, as well as the dividend paid to the non-controlling interest for the six months ended December 31, 2023.
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