OUR R E PORT REPORTING SCOPE AND BOUNDARY Reporting Period This report is produced and published annually. It provides material information relating to our strategy and business model, operating context, material risks, stakeholder interests, performance, prospects and governance, covering the period from 1 July 2021 to 30 June 2022. Operating Businesses The report covers the primary activities of the group, our business clusters, key support areas and subsidiaries in our Malaysian and international operations. Financial and Non-Financial Reporting The report extends beyond financial reporting and includes non-financial performance, opportunities, risks and outcomes attributable to or associated with our key stakeholders, which have a significant influence on our ability to create value. Targeted Readers This report is primarily intended to address the information requirements of long-term investors and other key stakeholders, including our staff, clients, regulators and society. This Integrated Report 2022 is our primary report to shareholders and other stakeholders. It is supplemented by documents published as part of our annual results announcement on our website and the disclosures outlined below. REPORTING FRAMEWORK In preparation of the report, we are guided by and references are made to the following: • Main Market Listing Requirement (“MMLR”) by Bursa Malaysia • Malaysian Code of Corporate Governance (“MCCG”) 2021 by Securities Commission Malaysia • Corporate Governance Guide (3rd Edition) issued by Bursa Malaysia and Securities Commission Malaysia • Malaysian Financial Reporting Standards (“MFRS”) • Global Reporting Initiative (“GRI”) Standards for Sustainability Reporting • International Financial Reporting Standards (“IFRS”) • Companies Act (“CA”) 2016 • Integrated Reporting Framework (“IRF”) by Value Reporting Foundation (“VRF”)(previously known as International Integrated Reporting Council) COMBINED ASSURANCE STATEMENT We employ a coordinated assurance model to assess and assure various aspects of the business operations, including elements of external reporting. These assurances are provided by management and the board, internal audit and independent external service providers. FORWARD-LOOKING STATEMENTS This report contains certain forward-looking statements with respect to DNeX’s financial position, results, operations and businesses. These statements and forecasts are based on current assumptions and circumstances, which could change, hence involve uncertainty. There are various factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements. Readers are cautioned not to put undue reliance on the forward-looking statements.
Tan Sri Abd Rahman Mamat Chairman Tan Sri Dato’ Sri Syed Zainal Abidin Syed Mohamed Tahir Group Managing Director Energy Information Technology Technology NAVIGATION ICON UNITED NATION SUSTAINABLE DEVELOPMENT GOALS (“UN SDG”) As part of DNeX’s strategy we have prioritised the following SDGs to ensure our business is environmentally, socially and economically sustainable. MATERIALITY DNeX will be guided by matters that are material to its targeted readers. Material Matters are identified, prioritised and validated via a three-step materiality assessment. This report focuses on those matters that we see as being most material to our capacity to create value, and to delivering on our core purpose. The directors in consultation with management annually identify the issues that could have the most significant impact on the Group’s ability to create sustainable value for its stakeholders. In determining these material issues the directors consider internal and external factors, including the Group’s strategy, the needs, expectations and concerns of our main stakeholders, and the economic and trading environment. STATEMENT OF THE BOARD OF DIRECTORS DNeX’S INTEGRATED REPORT 2022 The Board acknowledges its responsibility of ensuring the integrity of this Integrated Report, which in the Board’s opinion, provides a fair and balanced account of the Group’s performance. This report has been prepared in accordance and complies with Bursa Malaysia Listing Requirement. The report includes the Annual Financial Statements of the Group for the year ended 30 June 2022, which were approved by the Board of Directors on 19 October 2022, and signed on its behalf by FEEDBACK Your feedback is important to us and we welcome your input to enhance the quality of our reporting. Please email your feedback to communications@dnex.com.my You can find this report and additional information about DNeX on our corporate website www.dnex.com.my MATERIAL MATTERS GHG Emissions M1 Workforce Management M5 Resource Management M3 Energy Management M2 Employee Health & Safety M6 Ecological Impact M4 Product Quality & Safety M7 Business Ethics M9 Community Relations M8 Business Model Resilience M10 Data Privacy & Security M11 Supply Chain Management M12 CAPITALS Financial Capital Human Capital Intellectual Capital Manufactured Capital Social & Relationship Capital Natural Capital STRATEGIC THRUSTS Business Integration Financial Prudence Portfolio Diversification Governance and Excellence Human Capital Development KEY RISKS STAKEHOLDERS Society and Communities Customers Employees Shareholders and The Investment Community Government and Regulators Business Partners & Suppliers Media Market Geopolitics Health, Safety and Environment Human Capital Financial Foreign Exchange Information Technology
INSIDE AIMING HIGHER, ASCENDING GLOBALLY ABOUT OUR REPORT 6 Overview of Dagang NeXchange Berhad • Vision | Mission | Core Values • Who We Are • Our Key Strategic Thrusts 8 2022 Key Highlights • Financial Highlights • Business Highlights • Sustainability Highlights 10 What Differentiates Us: Our Strengths 12 Our Presence 14 Group Corporate Structure 16 What We Do: Core Business Segments 18 Corporate Milestones LEADERSHIP INSIGHTS 22 Chairman’s Statement 28 Group Managing Director’s Statement A global technology player, DNeX is ready for the next phase of growth as we transition to shape a more worldwide and resilient business. Having realised strategic milestones, our priority will be to tap new opportunities for growth potential, optimise our performance, reduce costs and manage risks. Leveraging on our expertise and industry insights, we will continue to drive strong momentum and deliver greater value for our customers and stakeholders by providing innovative solutions, quality products and services. As an environmentally-conscious organisation, we seek to ensure that we minimise any negative impact our operations have on the environment. We are also taking proactive steps to implement a sustainability agenda that will support our next phase of growth. In this dynamic and challenging environment, DNeX remains well-positioned for growth. 01 02 52nd ANNUAL GENERAL MEETING Multipurpose Hall, Level 3A, Dagang Net Tower, Block 10 (A & B) Corporate Park, Star Central, Lingkaran Cyberpoint Timur, Cyber 12, 63000 Cyberjaya Selangor, Malaysia WHERE Tuesday, 6 December 2022 WHEN 10.00 a.m. TIME This Integrated Report is available at www.dnex.com.my
VALUE CREATION @ DNeX 36 Our Integrated Approach To Value Creation 38 Our Key Capitals 40 Our Value Creating Business Model 42 The Value We Create MANAGEMENT DISCUSSION AND ANALYSIS A. Strategic Review 48 Operating Environment 52 Key Market Trends 56 Key Risks and Mitigation 63 Our Strategy B. Financial Review 64 Group Chief Financial Officer’s Review 70 5-Year Financial Highlights 72 Simplified Group Statements Of Financial Position 73 Group Quarterly Performance 74 Financial Calendar 75 Investor Relations 78 Share Performance C. Business Review 80 Technology 84 Energy 88 Information Technology LEADERSHIP 94 Corporate Information 96 Board at a Glance 97 Board of Directors’ Profile 108 Profile of Senior Management GOVERNANCE 114 Chairman’s Corporate Governance Overview 116 Corporate Governance Overview Statement 136 Additional Compliance Information 138 Statement on Risk Management and Internal Control 148 Audit Committee Report SUSTAINABILITY STATEMENT 152 Sustainability@DNeX 153 About this Statement 154 About DNeX 156 Membership in Associations 156 Sustainability Across the Supply Chain 157 Sustainability Governance 158 Stakeholder Engagement 162 Materiality 163 The DNeX Sustainability Framework 164 Environmental • GHG Emissions • Energy Management • Resource Management • Ecological Impact 171 Social • Workforce Management • Employee Health & Safety • Product Quality & Safety • Community Relations 184 Governance • Business Ethics • Business Model Resilience • Data Privacy & Security • Supply Chain Management 03 04 07 FINANCIAL STATEMENTS 189 Statement of Directors’ Responsibility 190 Directors’ Report 196 Statements of Financial Position 198 Statements of Profit or Loss and Other Comprehensive Income 200 Statements of Changes in Equity 204 Statements of Cash Flows 207 Notes to the Financial Statements 308 Statement by Directors 308 Statutory Declaration 309 Independent Auditors’ Report 08 SHAREHOLDERS’ INFORMATION 315 Analysis of Shareholdings 318 List of Properties 319 Group Corporate Directory 321 Notice of 52nd Annual General Meeting 328 Administrative Notes for the 52nd Annual General Meeting Form of Proxy 09 05 06
DAGANG NeXCHANGE BERHAD 4
TOGETHER Making Things Better, 5 DNeX INTEGRATED REPORT 2022
6 DAGANG NeXCHANGE BERHAD To be a leading multinational corporation that is trusted for its world-class services and expertise. VISION MISSION We are vibrant talents who are committed to deliver business innovation that creates value for stakeholders. CORE VALUES In any stellar organisation, core values are what define the direction and purpose. At DNeX, our four core values – Lean, Agile, Clean and Enterprising – serve as a lighthouse to our belief system: unmistakably guiding our engagement and relationships with our employees, clients and customers. Guided by these values, we have built DNeX into what it is today: a competitive force in Malaysia’s ICT and Energy market, and a key driver in developing the region’s infrastructure. LEAN We practise a performance-based culture that encourages us to do more with less – minimising waste and giving the best possible value for our people, our shareholders, and the markets we serve. AGILE We are a merit-based organisation that stays ahead through learning, inclusiveness, and change. CLEAN We are committed to the highest standards of business ethics – infusing trust in all business relationships and doing the right thing, even when no one is looking. ENTERPRISING We put our imagination to test and continuously invest in clever innovative solutions that achieves efficiency for our clients and communities.
7 DNeX INTEGRATED REPORT 2022 OUR KEY STRATEGIC THRUSTS WHO WE ARE Dagang NeXchange Berhad (“DNeX”) is a Malaysiabased investment holding company that operates through three segments, namely Technology, Energy and Information Technology (“IT”). Established in 1970, the company’s core businesses encompassed a group of specialised companies, each providing bespoke services, solutions and infrastructures, engineered and led by industry and technology experts. In Technology, the company is a leading semiconductor foundry while in Energy, the company is making its mark in upstream exploration and production as well as equipment supply and maintenance. In IT, the company is a leading provider of award-winning eServices for Trade Facilitation and has a wealth of knowledge, expertise and operational know-how in the provisioning of eServices for Trade Facilitation, Technology Consulting and System Integration, as well as Subsea Telecommunications. REVENUE RM1,457.38 MILLION RM707.27 MILLION PROFIT AFTER TAX BUSINESS INTEGRATION FINANCIAL PRUDENCE KEY STRATEGIC THRUSTS PORTFOLIO DIVERSIFICATION GOVERNANCE AND EXCELLENCE HUMAN CAPITAL DEVELOPMENT
RM1,457.38 MILLION 2021: RM330.50 MILLION R E V E N U E RM1,017.32 MILLION 2021 : RM785.44 MI LL ION SHARE CAPITAL RM4,625.63 MILLION 2021 : RM2, 179.75 MI LL ION TOTAL ASSETS 17.68 2021 : 6.24 NET EARNINGS PER SHARE (SEN) 0.74 2021 : 0.39 NET ASSETS PER SHARE (RM) 4.50 2021 : 11 .30 PRICE EARNINGS RATIO (TIMES) RM612.99 MILLION 2021: RM77.41 MILLION PROFIT BEFORE TAX RM707.27 MILLION 2021: RM68.63 MILLION PROFIT AFTER TAX RM1,015.20 MILLION 2021 : RM393. 15 MI LL ION CASH & CASH EQUIVALENTS BUSINESS HIGHLIGHTS DNeX and IAC collaboratewith Accenture to accelerate digital transformation for Malaysia’s public services, identifying and exploring opportunities to drive Malaysia’s economic growth in high value areas such as digitalisation, cloud computing, and the Fourth Industrial Revolution (“IR 4.0”). 24 May 2022 DNeX’s subsidiary Ping takes delivery of FPSO vessel from marine energy transportation company, Teekay Corporation to spearhead the Avalon Development. 1 July 2022 DNeX inks agreement with Cerulean Winds to deliver offshore floating wind turbine for the Avalon Development. 2 August 2022 DNeX renames newly acquired FPSO vessel to Excalibur for Avalon Development. 4 August 2022 DNeX to explore business synergy with Saudi Arabia-based Ajlan & Bros Holding Group (“Abilitii”) to explore business synergy between both companies. 27 June 2022 29 August 2022 DNeX strengthens ties with Saudibased Ajlan & Bros Holding Group to pave the way for IT opportunities and semiconductor manufacturing. DAGANG NeXCHANGE BERHAD 8 FINANCIAL HIGHLIGHTS
SilTerra has unveiled a new technology for automotive application integrated circuits or chips used in vehicles. 26 August 2021 SilTerra has collaborated with top universities namely Universiti Sains Malaysia (“USM”), Universiti Teknikal Malaysia Melaka (“UTeM”) and Universiti Malaysia Perlis (“UniMAP”), to deepen the company’s academic engagement in a range of areas in microelectronics technologies. 23 March 2022 DNeX’s subsidiary Ping has obtained “No Objection” on Concept Select for Avalon Development in the Central North Sea, United Kingdom. 11 April 2022 DNeX and Foxconn’s subsidiary to build and operate a new 12-inch wafer fabrication plant in Malaysia. 17 May 2022 SilTerra has introduced C-SOI®-based technology for MEMS and Photonics devices. 20 January 2022 SilTerra has entered into a multi-year wafer supply and purchase agreement with ILI Technology Corp (“Ilitek”), a leading touch controller and driver integrated circuit (“IC”) fabless design house based in Taiwan. 29 November 2021 S i lTer ra l aunched “TOGETHER, SILTERRA PLEDGE FOR INTEGRITY” a imed at cont inuous l y ins t i l l ing an env i ronment of TRUST, TRANSPARENCY, AND ACCOUNTABILITY WITHIN ALL ASPECTS OF BUSINESS OPERATIONS. DNeX ENHANCED i t s ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”) s tewardship and developed a Sus ta inabi l i ty Framework to improve the Group ’ s ESG responses . Ping Pet roleum recorded a REDUCTION OF 44.8% OF SCOPE 1 GHG EMISSIONS between Jul y 2021 - June 2022 compared wi th Jul y 2019 - June 2020. Dagang Net has in pl ace cus tomer and Government engagement programmes conducted on a quar ter l y bas i s to ensure HIGH QUALITY OF SERVICE DELIVERY. 9 DNeX INTEGRATED REPORT 2022 SUSTAINABILITY HIGHLIGHTS
10 DAGANG NeXCHANGE BERHAD Innovating Businesses, Growing Together DNeX prides itself its ability to offer effective, workable and commercially realistic solutions to exceed customers’ requirements. Its reputation for pragmatic services result from the company’s emphasis on understanding customers’ objectives, priorities and needs. An essential element of this is the close working relationship the company fosters with customers, where it places a premium on understanding customers’ commercial strategies and goals, and how they defend their competitive edge. Depth of Technological Know-how, Breadth of Technical Expertise DNeX leverages the technological expertise of its highly qualified teams of certified professionals, backed by their vast experience in providing added value in delivering the best solutions and services for customers. Domestic and Regional Expertise DNeX’s technology-driven experience, track record and problem-solving skills in diverse industries extend to projects not only in Malaysia but internationally as well in such countries as the United Kingdom, Indonesia, and Thailand. Holistic and Integrated Approach DNeX has extensive experience in engaging, consulting and advising end-users across the spectrum of projects to devise workable and realistic solutions for customers. Quality Assurance To assure consistent quality of service standards, DNeX emphasises on standard operating procedures in its workflow. The company also goes to great lengths to preserve data and confidentiality to safeguard customers’ interests. WHAT DIFFERENTIATES US: OUR STRENGTHS
RESILIENCE DRAWN FROM EXPERIENCE 11 DNeX INTEGRATED REPORT 2022
12 DAGANG NeXCHANGE BERHAD OUR PRESENCE 2,000 NUMBER OF EMPLOYEES BRANCHES 12 MALAYSIA 1 TAIWAN 1 INDONESIA 1 UNITED KINGDOM 1 THAILAND UNITED KINGDOM – Aberdeen
13 DNeX INTEGRATED REPORT 2022 TAIWAN – Hsin-Chu THAILAND – Bangkok MALAYSIA – Cyberjaya – Johor Bahru – Kemaman – Kota Kinabalu – Kuala Lumpur – Kuching – Kulim – Labuan – Miri – Penang – Shah Alam – Petaling Jaya INDONESIA – Jakarta
100.0% DNeX SEMICONDUCTOR SDN BHD 60.00% SILTERRA MALAYSIA SDN BHD 100.0% SILTERRA CAPITAL BERHAD 100.0% SILTERRA SALES & MARKETING SDN BHD 100.0% PEMBINAAN WAFERFAB SDN BHD 100.0% SILTERRA SALES & MARKETING (L) LTD 100.0% PING PETROLEUM UK PLC 100.0% PING PETROLEUM SDN BHD 100.0% OGPC SDN BHD 100.0% DNeX ENERGY SDN BHD 100.0% FORWARD ENERGY GENERATION LTD 98.29% DNeX DRILLING TECH AND OILFIELD SERVICES SDN BHD 90.00% PING PETROLEUM LIMITED 100.00% OGPC O & G SDN BHD 100.00% DAGANG NET TECHNOLOGIES SDN BHD 100.0% DNeX CAPITAL SDN BHD 100.0% DNeX SOLUTIONS SDN BHD 80.00% SEALNET SDN BHD 48.78% PT DAGANG SAMUDERA HUTAMA 95.00% PT DNeX TELCO INDONESIA 51.00% GENAXIS GROUP SDN BHD 100.00% GLOBAL MARKET eCOMMERCE SDN BHD 99.00% PT DAGANG NET INDONESIA 100.00% DNeX VMS SDN BHD 51.00% GLOBAL eCOMMERCE LIMITED 51.00% DNeX TELCO SERVICES SDN BHD 51.00% DNeX RFID SDN BHD 55.00% IMIZU SDN BHD 49.00% 1 TRADE (THAILAND) COMPANY LIMITED 60.00% INNOVATION ASSOCIATES CONSULTING SDN BHD 84.83% PUBLIC >20,000 SHAREHOLDERS 11.37% ARCADIA ACRES SDN BHD 3.80% FOXCONN SINGAPORE PTE LTD TECHNOLOGY ENERGY INFORMATION TECHNOLOGY 100.0% SILTERRA USA, INC. DAGANG NeXCHANGE BERHAD 14 GROUP CORPORATE STRUCTURE AS AT 28 SEPTEMBER 2022
TECHNOLOGY, HUMANISED FOR YOU Technology is only as good as its purpose. That is why we constantly embrace, challenge and improve on today’s latest technological advancements to provide communities an edge that impacts life for the better. 15 DNeX INTEGRATED REPORT 2022
SEMICONDUCTOR SilTerra Malaysia Sdn Bhd (“SilTerra”) is a 60 per cent-owned subsidiary of DNeX. It was founded in 1995 to provide a compact technological foundation for the country to become a developed nation, as well as a catalyst for influencing and developing breakthroughs in a variety of fields. Originally known as Wafer Technology Malaysia Sdn Bhd, the company has undergone several transformations including a rebranding to SilTerra in 1999 and an acquisition by DNeX and partner, Beijing Integrated Circuit Advanced Manufacturing and High-End Equipment Equity Investment Fund Center (Limited Partnership) (“CGP Fund”) in 2021. SilTerra is a global semiconductor foundry, specialising in Complementary Metal Oxide Semiconductor (“CMOS”) production technologies for advanced logic, mixed signal, radio frequency, and high voltage applications. SilTerra has expanded into more advanced technology fields, such as Silicon Photonics, Biophotonics, Micro-electromechanical System (“MEMS”) on CMOS, Galium Nitried (“GaN”) BCD, and Discrete Power — sometimes known as “More-Than-Moore” technologies. TECHNOLOGY ENERGY UPSTREAM EXPLORATION & PRODUCTION Ping Petroleum Limited (“Ping”) specialises in late-life oil and gas properties, with an emphasis on brownfield redevelopment of producing fields. Ping devotes its efforts towards preserving energy supply and exploring possibilities that help respond to rising demand of energy by acquiring important production assets in a fiscally transparent location. With a strong emphasis on continuous improvement, the company advocates extending the life cycle of its oil and gas assets to optimise return on investment. It continues to seek new strategic partnerships as well as further acquisitions towards building an attractive portfolio of exploration and production assets. EQUIPMENT SUPPLY & MAINTENANCE The company, through OGPC Sdn Bhd, supplies oil and gas equipment to a diverse international clientele. Through sales, onsite installation and maintenance, its expert technicians are committed to offering on-time services so that clients can enjoy seamless, uninterrupted operations. Leveraging on strong partnerships and strategic alliances with global OEM partners, the company provides end-to-end solutions from engineering design, supply, installation, commissioning as well as maintenance and complete aftermarket services. DAGANG NeXCHANGE BERHAD 16 WHAT WE DO: CORE BUSINESS SEGMENTS
INFORMATION TECHNOLOGY TRADE FACILITATION DNeX has pioneered and spearheaded initiatives aimed at creating paperless, electronic Customs-related services to ease the facilitation and streamlining of international trading processes for the import and export, trade and logistics industries. Through our subsidiary Dagang Net Technologies Sdn Bhd (“Dagang Net”), DNeX provides eServices for Trade Facilitation. Dagang Net is the operator of Malaysia’s National Single Window (“NSW”), which facilitates electronic Customs-related transactions and duty payments and electronic document transfers between members of its trading community. Besides providing eServices for Trade Facilitation for the Business – to Government (“B2G”) segment, the company has also expanded these services for the Business – to Business (“B2B”) segment. DNeX also offers SealNet as well, a digital trade and logistics platform that provides one-stop cloud-based logistics and cross border services to ease trade processes. SealNet empowers customers with a platform that is easy to use and can be accessed anytime, anywhere in real time. SealNet is positioned as the global digital trade connector enabling ease in not only regional but global trade as well. TECHNOLOGY CONSULTING AND SYSTEM INTEGRATION The company’s Technology Consulting and System Integration (“Tech Consulting and SI”) specialises in full project management, from design and build to installation and commissioning. Key areas of services provided by its business unit Innovation Associates Consulting Sdn Bhd (“IAC”) include next generation enterprise application, cloud computing and migration services, consulting and digital transformation as well as application development and innovation towards providing customised solutions for technology refresh, system integration as well as end-to-end enterprise-wide digital transformation. Online and on-site technical support technicians are authorised and certified by multinational vendors and strategic partners. SUBSEA TELCO SERVICES Equipped with advanced technology and expertise coupled with integrated support services, the company offers turnkey solutions for the design, engineering, supply, installation, and repair maintenance of marine fibre optic and power cables. Our range of services encompasses marine cable installation and maintenance and end-to-end solutions to a wide variety of markets and industries, including telecommunications, oil and gas, renewable energy, power and scientific research. 17 DNeX INTEGRATED REPORT 2022
1989 Toll Road Development • Pioneered solutions for the design and construction of Malaysia’s first major toll roads. • P r o v i d e d Ma l a y s i a ’ s f i r s t comprehensive toll gate solutions and services for both the North South Expressway and the New Klang Valley Expressway, as well as the Malaysia-Singapore Second Crossing. • I n t roduced t he h i gh- t ech I nt e l l i gent Tr a f f i c Sys t em, engineered for efficient expressway management. 1995 SMK-Dagang Net Designed and developed the first direct interface for Sistem Maklumat Kastam through pioneering efforts to enhance the use of eGovernment services, smartcards, and electronic fund transfers for the Port Klang trading and logistics community. Toll System Developed the first local toll system in Malaysia. 1994 Fibre Optic Telecommunications Rolled out Malaysia’s first fully digital fibre optic telecommunications network. 1970 Inception Founded as TIME Engineering Sdn Bhd to trade and distribute welding products. 1972 Electric Power Component Manufacturing Manufacture and supply electrical switchgears, switchboards and transformers. 1983 Public Listed Company Listed on the Main Board of Bursa Malaysia Securities Berhad and renamed as TIME Engineering Berhad. 1981 System Integration Established footing in ICT with core offering to supply hardware and provide services to the government sector. DAGANG NeXCHANGE BERHAD 18 CORPORATE MILESTONES
1996 Subsea Engineering • Introduced Malaysia’s first Remotely Operated Vehicle and Cable Joining System. • Also installed the Malaysia-ThailandEast submarine fibre optic cable link for the Telecommunicat ions Organisation of Thailand. 1997 Railways & LRT Provided trackwork solutions for PUTRA LRT and advised on rai l infrastructure for the KL Sentral Station in Brickfields. Sabah IPP Became first Independent Power Producer in Sabah that became (at the time) the largest power supplier in the state’s electricity board. 2003 PPSMI Appointed by the Government of Malaysia to supply multimedia teaching equipment and hardware for the nat ionwide implementat ion of Teaching and Learning of Mathematics and Science in English initiative (“PPSMI”). 1998 TIME Highway Radio Launched Malaysia’s first private radio station & THR Ford Transport Mobile, the first outdoor broadcasting vehicle designed to engage the public for opinions and concerns on current issues. 2004 B2G eServices Appointed by the Government of Malaysia to operate the electronic customs declaration value-added network and electronic permits for other government agencies. 2005 Islamic Capital Market The f i r s t r a t ed Su k u k Musharakah in the world through the Issuance of AssetBacked Sukuk Musharakah Programme with nominal value of up to RM2 billion. 2009 National Single Window Exclusively appointed to design, develop, operate and maintain Malaysia’s National Single Window. 2013 B2G eServices Developed and operated the I n f o rma t i on S y s t em o f Dangerous Goods and Free Zone for Port Klang Authority. 19 DNeX INTEGRATED REPORT 2022
2014 Rebranding to DNeX A new corporate brand identity to welcome new expansive business direction. National Single Window Retained as exclusive operator of Malaysia’s National Single Window for Trade Facilitation. DNeX Energy Established a diversified business arm to focus on oil & gas services and power generation. 2015 myCargo2U® Launched myCargo2U®, Malaysia’s first all-in-one solution for Cargo and Trade Management. Pan Asia Exchange Groundbreaking collaboration with the Pan Asian Alliance to connect 340,000 suppliers in Asia with global buyers. Directional Drilling First Malaysian service provider for sub-surface directional drilling work. Bangladesh IPP Developed a small power plant in Bangladesh that is set to serve the local community. 2016 Ping Acquisition Marked DNeX’s entry into the upstream oil & gas segment with its acquisition of 30 per cent interest in Ping Petroleum Limited (“Ping”) for the producing Anasuria Cluster in the North Sea. OGPC Group Acquisition Acquired a leading provider of equipment, maintenance and se r v i ces f o r o i l and ga s , petrochemical, power, and general industries. Vehicle Entry Permit (“VEP”) and Road Charges (“RC”) System Project Awarded a total subcontract to p i onee r t he deve l opmen t , operation, and management of the VEP a nd RC S y s t em f o r 5 years. 2018 Genaxis-IAC Acquisition • Acquired Innovation Associates Consul t ing Sdn Bhd (“IAC”) through Genaxis Group Sdn Bhd. • IAC was earlier contracted by the Government of Malaysia to implement an accrual accounting shared system - the Government Financial and Management Accounting System (“iGFMAS”). Dagang Net Digital Platform (“DNDP”) Launched DNDP, a unified business p l a t f o rm conve r g i ng T r ade Facilitation & Supply Chain, Global Halal Services , and Financial Technology digital offerings. EC-Council Global Services Licensed by world class EC-Council Global Services to provide its s t anda r d o f cybe r secu r i t y consultancy and advisory services in Malaysia. 2017 SealNet Launched as 1TradeTM, SealNet is a B2B webbased application that simplifies cargo and trade management processes via a one-stop portal. DAGANG NeXCHANGE BERHAD 20 CORPORATE MILESTONES
2019 Regional Network Established its regional footprint through the opening of an office in Jakarta, offering eServices and IT Solutions to cater to the Indonesian market. Automatic Tank Gauging (“ATG”) system Awarded contract to supply, install, test, commission and maintain ATG for some 200 PETRONAS stations worldwide. 2020 Collaboration with MARii Dagang Net Technologies Sdn Bhd collaborated with Malaysia Automotive Robotics and IoT Institute (“MARii”) to jointly develop and operate a Webbased information system for used vehicles. 2021 Ping Acquisition Completed acquisition of additional 60 per cent stake in Ping, expanding its holding to 90 per cent. SilTerra Acquisition Acquired 60 per cent stake in SilTerra Malaysia Sdn Bhd (“SilTerra”), a global semiconductor foundry. Avalon Oilfield Acquisition Ping acquired the remaining 50 per cent stake in UK North Sea Block 21/6b, License P.2006, containing the Avalon Oil Development. New Technology for Automotive Application ICs SilTerra unveiled a new technology, 180nm Bipolar-CMOS-DMOS (“BCD”) automotive grade process technology, for automotive application integrated circuits (“ICs”) or chips used in vehicles. 2022 New Manufacturing Technology SilTerra introduces C-SOI®-based technology for MEMS and Photonics devices. Progress in Avalon Development Ping obtains “No Objection” on Concep t Se l ec t f o r Av a l on Development, the company’s green field asset. 21 DNeX INTEGRATED REPORT 2022
STATEMENT “DURING THE PAST 12 MONTHS WE EMBARKED ON THE MOST AMBITIOUS TRANSFORMATION IN OUR HISTORY, STRATEGICALLY INVESTING INTO HIGH GROWTH SECTORS WHILE LEVERAGING PARTNERSHIPS TO EXPAND OUR SERVICE OFFERINGS AND PENETRATE INTERNATIONAL MARKETS. THE RESULT IS A STRONGER AND MORE RESILIENT DNeX THAN EVER BEFORE; ONE POSSESSING THE RESOURCES AND THE EXPERTISE TO BECOME A GLOBAL LEADER ACROSS OUR BUSINESS SEGMENTS AND DELIVER CONSISTENT GROWTH OVER THE LONG TERM.” Dear Shareholders, It gives me great pleasure to present to you our Integrated Report and Audited Financial Statements for the financial year ended 30 June 2022 (“FY2022”). In this report, we aim to illustrate the cohesive approaches and values that underpin our expanded business presence, and engender your trust as we continue our pursuit of growth. Our new era is just beginning, and we are excited to share this journey with you. DAGANG NeXCHANGE BERHAD 22
AN ORGANISATION TRANSFORMED AND ENERGISED During FY2022, we delivered on our ambitious transformation roadmap, executing several key transactions that included the acquisition of a 60 per cent stake in SilTerra Malaysia Sdn Bhd (“SilTerra”) – a global player in the semiconductor industry – after the increase of our stake in Ping Petroleum Limited (“Ping”) to 90 per cent at the end of the financial year preceding the year under review. These strategic moves mean we now have a much stronger balance sheet, with a war chest to capitalise on additional growth opportunities moving forward. With the new assets at our disposal, our first priority was to optimise their financial performance, which we achieved by implementing targeted operational efficiency and cost management measures. We then initiated plans to expand our capacities and enhance our capabilities, approving much needed capital expenditure plan for our Technology division and pursuing strategic partnerships across all divisions. Just as important as the operational measures we undertook, have been our efforts to achieve consistency and coherence in our approach. As a leading player in our respective industries, doing so is vital to ensure that our presence creates longterm value for our shareholders, our people and the communities and natural environments that support us. Armed with this overarching focus, we have initiated specific strategies across human resources, governance and Sustainability, which I will expand upon below. 23 DNeX INTEGRATED REPORT 2022
ENHANCING THE EMPLOYEE EXPERIENCE Maintaining a strong human capital base is crucial to maximising our value creation potential in this new era. To this end, we undertook a comprehensive human resource transformation plan in FY2022, driven across five pillars – System, Expertise, Organisation, Leadership and Culture. Our entire human resource transformation plan is underpinned by the digitalisation of our processes. End to end, from recruitment to payroll management, digital technologies are being implemented to enhance the employee experience. These technologies will allow better access to data-driven insights across the entire employee lifecycle, empowering continuous improvement to our hiring, employee engagement and performance management practices over time. In terms of employee development, we have started work on enhancing our Talent Management and Succession Planning Framework. The framework will provide clear guidance to our subsidiaries in developing and retaining their best employees through structured and tailored needs towards building a pipeline of talent ready and future to take on leadership positions. At the same time, we have upgraded our employee benefits structure to more effectively compete in today’s highly competitive labour market. Toward this end, we have enhanced our salary structure and benefits to align more competitively to the market. We also re-structured our Performance Management System (“PMS”) that differentiates the reward for our employees based on performance. A revised Employee Share Option Scheme (“ESOS”) was introduced to drive retention of our best employees with continuous developments to help them excel in their roles and career growth in the Group. By adopting a Group-wide focus on enhancing the employee experience, we hope to further improve our employee engagement rating, which stands at 81 per cent as of the previous survey in FY2022. Moving forward, we will continue to obtain feedback from our valued workforce on a regular basis, thus ensuring an engaged workforce in a high performance culture. With our business presence now more geographically diverse than ever before, embedding a common culture is another vital area of focus. In FY2022, we increased our quantum of employee engagement activities and town halls, seeking to build stronger connections within and across teams for improved collaboration. Complemented by our training programmes, the overarching goal here is to inculcate a growth-focused, entrepreneurial mindset, in line with our core values. CHAIRMAN’S STATEMENT ENERGY 27% IT 14% TECHNOLOGY 59% REVENUE CONTRIBUTION DAGANG NeXCHANGE BERHAD 24
INTEGRATING BUSINESS AND SUSTAINABILITY Our diverse and global presence endows us with a responsibility to operate in ways that generate long-term value for people, communities and natural environments. Adopting a proactive approach, we undertook extensive efforts towards developing the Group’s Sustainability Framework. The framework is pillared on four Sustainability themes – “Stewarding A Sustainable Environment”, “Empowering Our People”, “Creating Value For Our Customers And Community” and “Embracing Good Governance For Business Resilience” – positioning us to make a greater positive impact and attain more holistic stewardship across the Environmental, Social and Governance (“ESG”) spectrum. Each of the themes in turn lead to specific ambitions which we will work towards achieving, through initiatives spanning across 12 material ESG issues identified and refined through engagements with our stakeholders. Implementing the framework will take time and considerable effort, and it starts with educating our workforce on the importance of Sustainabi l i ty and integrat ing ESG considerations into our everyday business practices. To this end, we have appointed Sustainability champions within each of our companies who will take the lead in driving a culture of Sustainability and ensuring alignment to the framework at ground level. In the long-run, we aspire to bring our suppliers and customers with us in our journey towards becoming an ESG-driven organisation that goes beyond a series of checklists. In the medium-to-long-term, our goal is to also improve the Group’s Sustainability index ratings and become recognised as leaders in Sustainability within our respective industries. Currently, we are tracking well towards this goal, with our ESG Rating – based on the FTSE Russell ESG Ratings Methodology – having risen from 1-star to 3-star during the past year alone. This is an impressive improvement in such a short space of time, and it places us in the top 26 to 50 per cent of companies in the FTSE Bursa Malaysia EMAS index. Stewarding a Sustainable Environment Empowering Our People Creating Value for Our Customers and Community Embracing Good Governance For Business Resilience 25 DNeX INTEGRATED REPORT 2022
Needless to say, there remains tremendous scope for us to create even more positive impact. Looking forward, we will commence taking stock of our emissions Group-wide, starting with our Scope 1 (direct emissions) and Scope 2 (indirect emissions from purchased electricity, steam, heat or cooling) emissions to develop our carbon neutral roadmap, and then expand our inventory to Scope 3 (other indirect emissions in our value chain) emissions in our journey to become a net-zero emissions company by 2050. In the medium term, we will also look into adaptation and mitigation strategies in facing climate change. These will not only help us to be more equipped in facing climate-related risks, but also do our part to reduce our impact towards climate change. In the Social aspect, we will continue to enhance our employee experience to attract and retain the talent needed for us to deliver value to our stakeholders, and strive to become the local employer of choice in the countries we operate in. As we move forward, we are also cognisant of our role in the communities surrounding our businesses. I would like to express my pride at the meaningful contributions that our workforce continue to make for local communities in times of need. During the past year, our teams banded together to help those affected by the devastating floods of December 2021 and January 2022, while also assisting everyday Malaysians with financial aid during the Ramadan month. The community spirit they have shown is the truest reflection of our core values as an organisation, and together, we will continue to strive to become an impactful organisation to the communities in all the ways that we can. DELIVERING EXCELLENCE IN GOVERNANCE The imperative of achieving consistency in our processes – and therefore, the performance that our business divisions attain – rests ultimately on the robustness of our corporate governance practices. Acutely aware of the impact that a single negative incident can have on our reputation and in turn our performance, we have taken substantive steps in FY2022 towards mitigating risks from existing and emerging issues across our operating environment. These steps included a newly formed Risk & Governance Committee (“RGC”) to assist the Board in discharging its oversight responsibilities and fulfilling its fiduciary responsibilities in ensuring that there exist adequate and effective systems of governance, risk management and internal controls and to manage the overall risk exposure of the Group. This role was previously entrusted to the Audit Committee. However, the rapid growth of the Group over the last two financial periods have made it necessary to have a separate RGC to support the Board and the Audit Committee in discharging their responsibilities. The scope and terms of reference for this committee was subsequently expanded to also include purview over matters relating to Sustainability for the Group and the committee was re-named the Risk, Governance & Sustainability Committee (“RGSC”) to reflect this expanded scope. During FY2022, various initiatives were implemented to strengthen corporate governance practices of the Group. These include the revision of the Group’s Discretionary Authority Limits, which sets out the limits of authority delegated to different levels of management to facilitate timely, effective and quality decision-making in line with the expansion of the Group’s business. Another initiative is the establishment of the DNeX Group Investment Framework and Policy, which sets out the principles and rules to govern the Group in initiating, assessing, deciding, conducting and monitoring its investment processes and standardise the whole investment process for the Group, from start to finish, including post investment integration and monitoring. In addition, there are also the Directors’ Remuneration Policy; Guidelines of Directors’ Fees for subsidiary companies; the Directors’ Code of Ethics and Conduct; the Directors’ Fit and Proper Policy; as well as individual board charters for our subsidiary companies that were added to our suite of Group-wide policies during the year under review. DAGANG NeXCHANGE BERHAD 26 CHAIRMAN’S STATEMENT
AN OPTIMISTIC OUTLOOK TO THE FUTURE FY2022 was a year of opportunities grasped; a time when we aggressively transformed our business and opened new and exciting avenues for continued growth. This would not have been possible without the unstinting efforts of our dedicated workforce and the sterling stewardship provided by the Board and our senior management team. Thanks to their collective vision and execution, we look forward to the future with optimism, equipped with the financial means to invest in emerging technologies and expand our operations to new markets. However, this optimism must be tempered with a responsible degree of caution. Rising inflation rates across the world point to a protracted slowdown in the global economy, which will affect demand across the business community. This will be exacerbated by the continuing Russia-Ukraine conflict and its effect on energy prices, leading to decreased buyer confidence. Here in Malaysia, the economy registered robust growth of 6.9 per cent in the first half of 2022. However, this was largely due to pent up demand from the pandemic, and the nation’s economy remains susceptible to sluggishness in global growth and supply chain disruptions. For these reasons, we will continue to place emphasis on risk monitoring and mitigation, complementing our pursuit of new growth opportunities with strong oversight and responsiveness to our evolving operating environment. ACKNOWLEDGEMENTS On behalf of the Group, I would like to express my heartfelt thanks to all our shareholders, customers, suppliers, business partners and to the Government of Malaysia for their continued support during the past year. In particular, I would like to recognise the contributions of our shareholders, who have been pivotal partners on our journey of growth and transformation, showing unwavering trust in our strategies throughout. My appreciation also goes to my fellow members of the Board for their support and contribution, the management team and employees for their strong commitment and dedication to the Group in pursuing our goals. Together, we will capitalise on the opportunities of a new era for the world, and for DNeX. Tan Sri Abd Rahman Mamat Chairman Looking at governance through the broader lens of the turbulent operating environment that prevails today, we understand that ensuring the continuity of our business at all times is paramount. To this end, our Business Continuity Management (“BCM”) Policy & Framework was approved in May 2022, detailing actions to be taken in the event of a crisis at the global, national or market level. BCM planning is also ongoing for our individual companies and should be completed by the end of FY2023. Separately, and in line with our strategic thrust towards greater operational efficiency, we are revising our Enterprise Resource Management (“ERM”) Framework to be more dynamic and reflective towards current developments. This will be a boon to our resource planning efforts - which are increasingly complex given our wide geographical presence - and will empower our teams to collaborate in achieving greater economies of scale across procurement, production and marketing, amongst other areas. 27 DNeX INTEGRATED REPORT 2022
REAPING THE REWARDS OF OUR TRANSFORMATION From a global industry landscape standpoint, our financial year ended 30 June, 2022 (“FY2022”) presented us with a variety of challenges - a shortage of labour at global ports resulted in supply chain bottlenecks, the ongoing Russia-Ukraine conflict caused volatility in energy and raw material prices and the weakening British Pound. Against this backdrop, the Group nevertheless secured a highly robust financial performance in the last 12 months, thanks largely to our strategic investment activities, shrewd expansion outlays and focused operational enhancements that were instigated as part of our Transformational Roadmap incepted in FY2020/2021. DAGANG NeXCHANGE BERHAD 28
DIRECTOR’S STATEMENT Our performance was spearheaded by an incredibly successful turnaround story at SilTerra Malaysia Sdn Bhd (“SilTerra”), which we had acquired together with Beijing Integrated Circuit Advanced Manufacturing and High-End Equipment Equity Investment Fund Center (Limited Partnership) (“CGP Fund”) in July 2021. SilTerra recording its highest annual revenue and profit performance in history dovetailed with a robust performance from our Energy Division, where we increased our stake in Ping Petroleum Limited (“Ping”) to 90 per cent and benefitted from a spike in crude oil prices, to help us more than triple our annual revenue and profit after tax from RM330.50 million and RM68.63 million in FY2020/2021 to RM1,457.38 million and RM707.27 million in FY2022 respectively. Not only do these results give credence to the transformational strategies that we have employed, but they provide a solid financial foundation upon which we may now begin to vigilantly undertake expansion and growth plans across all industry segments in which we have established our presence, as well as into new emerging sectors that reflect our growing global ambitions. “WE ARE PLEASED TO HAVE DELIVERED A HIGHLY ROBUST FINANCIAL AND OPERATIONAL PERFORMANCEINFY2022.THETRANSFORMATIONAL JOURNEY THAT WE EMBARKED UPON IN FY2020/2021 HAS SEEN US SUCCESSFULLY EXPAND AND CONSOLIDATE OUR OPERATIONS WITHIN HIGH-VALUE INDUSTRYSECTORSWITHLONG-TERM GROWTH POTENTIAL, AND WE ARE BEGINNING TO REAP THE FRUITS OF OUR LABOUR ASWE ACHIEVED RECORD REVENUE AND PROFITS OVER THE LAST FINANCIAL YEAR. MORE IMPORTANTLY, WE HAVE CONTINUED TO ENHANCE OUR OPERATIONAL EFFICIENCIES AND MANUFACTURING CAPACITIES AS WE PLACE OURSELVES FIRMLY ON A RESILIENT TRAJECTORY FOR SUSTAINABLEGROWTH INTOTHE FUTURE.” REVENUE RM1,457.38 MILLION FY2020/2021: RM330.50 MILLION EARNINGS PER SHARE 17.68 SEN FY2021: 6.24 SEN PAT RM707.27 FY2020/2021: RM68.63 MILLION TAN SRI DATO’ SRI SYED ZAINAL ABIDIN SYED MOHAMED TAHIR GROUP MANAGING DIRECTOR 29 DNeX INTEGRATED REPORT 2022
“DNeX TOOK DELIVERY OF THE SEVAN HUMMINGBIRD FLOATING PRODUCTION STORAGE AND OFFLOADING (“FPSO”) VESSEL ON 1 JULY 2022, WHICHWE HAVE RENAMED TO EXCALIBUR. THE ACQUISITION OF THE 60 METRE-DIAMETER EXCALIBURWILL PLAY A CRUCIAL ROLE IN OUR EXPANSION ACTIVITIES FOR PING, AS IT FEATURES A STORAGE CAPACITY OF 270,000 BARRELS OF OIL AND IS CAPABLE OF PRODUCING UP TO 30,000 BARRELS OF OIL PER DAY AND SUPPORTING UP TO 47 OFFSHORE PERSONNEL. HIGHLIGHTS OF OUR PERFORMANCE IN FY2022 Our acquisition of global semiconductor manufacturer SilTerra in July 2021 was complemented by the formation of a SilTerra transformation management team and deployment of capi tal expenditure to undertake an intensive transformation plan as well as improve operations, capture new business and optimise manufacturing capacity. This has resulted in our newly minted Technology Division catapulting into the biggest revenue earner of the Group, contributing RM857.67 million or 59% of our total revenue in FY2022. A key operational triumph during the year was our success in unlocking economies of scale by focusing our manufacturing on a smaller variety of products at higher volumes. This significantly lowered our manufacturing costs, ramped up profit margins and enabled Si lTer ra to sel f-fund i ts subsequent expansion plans. Our record-breaking revenue and profits were aided by our securing of several new long-term agreements (“LTAs”), including with ChipOne Technology (Beijing) Co. Ltd and ILI Technology Corp, that combined to contribute towards approximately 70 per cent of SilTerra’s capacity, while other global clients chipped in to facilitate our achievement of 100 per cent capacity utilisation as at September 2022. With further capacity expansion of 10 per cent underway and expected to be completed in early 2023, along with significant progress being made in the development and test ing of new emerging technology products such as Mi cro-e l ect romechan i ca l Sys tem (“MEMS”) technologies and Si l icon Photonics (“SiPh”), we are on track to begin utilising the impending capacity to manufacture these new high margin products that offer a wide range of applications in emergent markets. DAGANG NeXCHANGE BERHAD 30 GROUP MANAGING DIRECTOR’S STATEMENT
Meanwhile, in our Energy Division, higher crude oil prices helped us offset a lower production volume at our Anasuria oilfields in first quarter FY2022 due to a riser reinstatement exercise, while we successfully extended OGPC Sdn Bhd’s (“OGPC”) contract for Automated Tank Gauging from Petronas Dagangan Berhad until July 2023. We also took delivery of the Sevan Hummingbird Floating Production Storage and Offloading (“FPSO”) vessel on 1 July 2022, which we have renamed to Excalibur. The acquisition of the 60 metre-diameter Excalibur will play a crucial role in our expansion activities for Ping Petroleum, as it features a storage capacity of 270,000 barrels of oil and is capable of producing up to 30,000 barrels of oil per day and supporting up to 47 offshore personnel. Having increased our stake in the Avalon oil field development to 100 per cent in FY2022, we are pleased to report that we received a letter of ‘no objection’ from the North Sea Transition Authority in April and are now finalising conceptual development planning and beginning front-end engineering works in preparation to submit the Avalon Field Development Plan, with the Final Investment Decision anticipated later this year. With a total estimated ultimate recovery (“EUR”) of 23 million barrels of oil reserves over a period of 12 years, oil production from Ping’s second oilfield asset is expected to come onstream in 2025. In our Information Technology (“IT”) Division, we have streamlined our focus into three key areas, namely Trade Facilitation, Technology Consulting and System Integration (“Tech Consulting & SI”) and Subsea Telecommunications, all of which achieved marked improvement in their performance as the year progressed and our rationalisation efforts began to bear fruit. In addition to launching new services this year, our Trade Facilitation arm Dagang Net Technologies Sdn Bhd has already secured a threeyear extension as the operator of the National Single Window (“NSW”) for Trade Facilitation until August 2024. The new services launched will provide exciting opportunities for revenue growth for example the Non-Preferential Certificate of Origin (“eNPCO”) service is already under pilot stage testing with eight companies, and our eCert service is setting the stage for international expansion following a pilot implementation programme commencing with New Zealand in July 2022 and plans for Australia in the works. Within our Tech Consulting & SI unit Innovation Associates Consulting Sdn Bhd (“IAC”), we secured the iGFMAS maintenance and support contract worth RM88 million from Ministry of Finance Malaysia and further generated new sales pipelines for the development of advanced applications utilising Analytics, Big Data, Artificial Intelligence and Robotics Process Automation. These developments are congruent with the Group’s mandate to venture into larger scale ERP systems implementation and cutting-edge IT application development. Meanwhile, our Subsea Telecommunications arm DNeX Telco Services Sdn Bhd has restructured its organisational chart to enhance its processes and efficiency. It has also stepped up efforts to recover its receivable cash assets of RM27 million from TelkomInfra, which is a key step forward in our mission to enable the company to begin self-funding its operational expenses and repay its debts to other entities within the Group. 31 DNeX INTEGRATED REPORT 2022
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