DESTINI Annual Report 2019

03 PERFORMANCE Financial Review For close to a decade, Destini has maintained its profitability by diversifying and expanding its income stream. Alas, in FYE2019 the Group slipped into red with a loss after tax and non-controlling interest (“LATNCI”) of RM247.82 million. This is in comparison to a profit after tax and non-controlling interest (“PATNCI”) of RM1.77 million in financial year ended 31 December 2018 (“FYE2018”). The decrease in income was on the back of a lower revenue of RM297.74 million in FYE2019 from a revenue of RM418.05 million in FYE2018. As the Group’s revenue took a dip, it had also reflected to a lower gross profit of RM16.89 million in FYE2019 as compared to RM155.49 million in FYE2018. The 28.78% slip in revenue is mainly attributed to completion of major projects and lower amount or work orders across all the industries the Group has a foothold in. Furthermore, the delays in administrative decisions on several Government contracts also impacted the Group’s topline. Although Destini saw several completed projects during the year, there were still fixed costs that had to be carried forward in preparation for new potential projects. This led to the Group’s decision to undergo a corporate exercise to raise RM49.67 million in funds through a private placement to repay bank borrowings and for working capital purposes. This exercise was also to ensure that the Group has sufficient capital to continue its operations with a stronger balance sheet. This private placement exercise was intended to issue up to 231.05 million shares, representing up to 20% of the total number of issued shares in Destini at an issue price of 21.5 sen per share. From the total amount that could be raised, the Group estimated to utilize RM21 million of the proceeds to repay bank borrowings while RM22 million will go towards funding existing projects and RM5 million for new projects. The additional RM1.39 million is earmarked for general requirements while the balance of the proceed will be used to cover the estimated expenses for the exercise. Seeing a challenging year the Group underwent during FYE2019, Destini’s management decided to review its long- term contracts and did a reconciliation of its accounts at the end of 2019, which includes a provision and impairment of its assets and goodwill, which is reflective of the overall market conditions. From the provisions made, the Group recognised net impairment losses on receivables of RM58.17 million, net impairment losses on intangible assets, property, plant and equipment and other assets amounting to RM93.69 million. The Group had also recognised additional finance costs of RM23.25 million during the year in review. Further details on the performance of Destini’s businesses is illustrated in the business performance review section of this Management Discussion and Analysis. MANAGEMENT DISCUSSION AND ANALYSIS DESTINI BERHAD 040