VARIATION AND EXTENSION OF TIME FOR THE UTILISATION OF PROCEEDS RAISED FROM THE INITIAL PUBLIC OFFERING ( IPO )

Transcription

1 PECCA GROUP BERHAD ( PGB OR THE COMPANY ) VARIATION AND EXTENSION OF TIME FOR THE UTILISATION OF PROCEEDS RAISED FROM THE INITIAL PUBLIC OFFERING ( ) 1. INTRODUCTION The Company had raised gross proceeds of RM67.87 million from its ( ) in conjunction with the listing of and the quotation of its entire share capital on the Main Market of Bursa Malaysia Securities Berhad on 19 April The Board of Directors of the Company ( Board ) wishes to announce that the Board has approved the variation of the utilisation of amounting to RM6.60 million to the working capital of the Company and the extension of time for the utilisation of amounting to RM2.62 million for another 24 from 19 April DETAILS OF THE VARIATION AND EXTENSION OF TIME FOR THE UTILISATION OF PROCEEDS PGB and its subsidiaries have utilised approximately RM58.66 million as at 19 April 2018 from the total of RM67.87 million. The details of the variations and extension of time of the are set out below: Purpose raised Actual Utilisation as at 19 April 2018 Balance Unutilised (RM 000 / %) Variation (RM 000 / %) Extension (RM 000 / %) Estimated Timeframe for (from listing date) (a) Working Capital 26,970 (27,859) (889)/ 3.3% (i) 6,595 (a) Within 12 Revised Expected Timeframe for (from 19 April 2018) 1

2 Purpose (b) Repayment of bank borrowings (c) Purchase of new machineries for the production of car leather seat covers (d) Construction of an additional storey of production floor area on the existing factory building raised Actual Utilisation as at 19 April 2018 Balance Unutilised (RM 000 / %) Variation (RM 000 / %) Extension (RM 000 / %) Estimated Timeframe for (from listing date) 17,100 (17,100) Within 6 7,550 (3,823) 3,727/ 49.4% (2,679) (b) 1,048 (ii) Within 24 5,000 (5,000) Within 24 Revised Expected Timeframe for (from 19 April 2018) Within 24 (e) Opening of retail outlets 3, ,750 / 100% (3,750) (c) Within 24 (f) Establishment of market presence in Thailand 1,500 (262) 1,238 / 82.5% 1,238 (iii) Within 24 Within 24 (g) Expansion of aviation business 1,000 (505) 495 / 49.5% (166) (d) 329 (iv) Within 24 Within 24 (h) Estimated listing expenses 5,000 (4,111) 889/17.8% (i) Immediate Total 67,870 (58,660) 9,210 / 13.6% 6,595 (e) / 9.7% 2,615 / 3.9% 2

3 Notes: (i) Estimated listing expenses As stated under Section 2.7 in the prospectus, if the actual listing expenses are lower than budgeted, the excess will be utilised for working capital purposes. Hence, the excess amount of RM0.90 million under the estimated listing expenses has been fully utilised under the working capital of the Company. (ii) Purchase of new machineries for the production of car leather seat covers The planned purchase of the aforementioned machineries was to support our business activities and to expand its annual production capacity from 120,000 to 170,000 car sets of car seat covers to cater for the anticipated increase in sales volume. However, after the, the automotive industry has recorded weak performance with total new passenger & commercial vehicles registered in Malaysia for both years 2016 and 2017 were at 580,124 and 576,635 respectively, which are significantly lower than 666,674 units recorded in year 2015 as published by Malaysian Automotive Association ( MAA ). MAA has also forecasted that the new passenger & commercial vehicles registered in Malaysia for year 2018 to be at 590,000 units which is still below year In view of this, the Board has been prudent not to commit to all the budgeted machines and has deferred some purchase. However, the Group is expected to purchase the remaining one cutting machine and one perforation machine within the next 24 in view of incremental order for some leather seat cover program secured. (iii) Establishment of market presence in Thailand PGB has set up an office in Thailand and has incorporated Pecca Leather (Thailand) Limited on 25 October We have successfully completed some adhoc orders from a customer and have been continuing exploring various business opportunities with car manufacturer in Thailand. Despite of these efforts, the Group has yet to secure a sizeable order from Thailand customers and hence not being able to complete the utilisation of for purpose of manufacture the inventory of leather seat cover. The Board is confident that with present ongoing discussion on distribution channel with one entity in Thailand coupled with additional effort on sales and marketing activities, PGB will be able to secure some supply contract for leather seat covers and utilise the balance of the within the next 24. 3

4 (iv) Expansion of aviation business The aviation segment is primarily involved in 2 main areas (a) The provision of repair and restoration of nonstructural cabin interior parts and material; and (b) the provision of aviation leather upholstery scope under the Part 145 Repair Station approval granted by Civil Aviation Authority of Malaysia ( CAAM ) (previously known as Department of Civil Aviation, Malaysia). The Group has not purchased any aviation raw materials to the budgeted amount as it has yet to secure any sizeable seat cover replacement projects for commercial aircraft. Besides the abovementioned Part 145 Repair Station approval, Pecca Aviation Services (M) Sdn Bhd ( PAviation ) is require to submit additional application for Production Organisation Approval to CAAM to undertake the scope of refurbishment of leather seat cover for commercial aircraft. We have submitted the said application to CAAM on 1 March Upon obtaining the approval from CAAM, the Group is optimistic to secure the seat cover replacement program from commercial airlines and will be able to utilise the balance within the next 24. Please refer to Section 3: Rationale of this announcement for the explanation for notes (a) to (e). 3. RATIONALE The Board of PGB has decided to reallocate the utilisation of the in the following manner and for the following reasons: a) Estimated listing expenses Comprised of the current variation amount of RM6.60 million whereby the unutilised amount under listing expenses of RM0.90 million has been utilised as working capital. b) Purchase of new machineries for the production of car leather seat covers In view of the weakening local automotive market in years 2016 and 2017, our customers have requested for cost reduction initiatives among others including simpler styling/stitching design and lower leather configuration to reduce the part cost supplied. To meet the cost target requirement, we have reconducted study on the new machine specification requirement and opted for cheaper machine which meet the basic stitching/styling requirement of customer. Further, the reduction in leather configuration also resulted in the corresponding increase in Polyvinyl Chloride (PVC) cutting requirement and hence we have purchased the PVC cutting machine 4

5 which command lower selling price compared to leather cutting machine. The above has resulted in a variation of RM2.68 million which the Board has approved to be utilised as working capital. c) Opening of retail outlets Originally, the Group plans to sell our products directly to end users and penetrating into the Replacement Equipment Manufacturer ( REM ) retail industry by opening of retail outlets across Malaysia to focus on selling our Smart Fit and Quick Fit products, and car accessory covers. However, there has been a change in the REM market scenario during the past two years whereby some of the car manufacturer has started to introduce their own Original Equipment ( OE ) leather variant on models and makes which is previously under fabric seat cover variant. This has resulted in smaller potential market left over for leather seat cover conversion in aftermarket. In view of this, the Group has explored other prudent avenue to continue our pursue to penetrate into the REM segment. The Group is presently in negotiation with several parties which operate chain of retail outlet to bundle their product with our leather seat covers for offering to customer in retail market. The collaboration is expected to result in savings on the initial renovation cost of RM3.75 million and subsequent monthly overhead cost to operate the outlets. The intended renovation cost of the retail outlets will be varied for working capital mainly selling and distribution expenses as the Group will be focusing more on advertising and marketing activities to bring up the branding of our Smart Fit and Quick Fit product for the REM retail market. d) Expansion of aviation business In fulfilling the part refurbishment contract with customers, the aviation segment has negotiated with the customers on the minimum requirement for the investment on tool and equipment including the paint booth. This is in view that the contract volume is low and fluctuating and the amortization cost of investment need to be minimised in order to keep the part refurbishment cost at the acceptable level to the customers. The Board has approved for the variation to this utilisation of RM0.17 million to selling and distribution expenses to fortify our effort in securing more aviation contacts. e) The total unutilised of RM6.60 million shall be reallocated to the working capital as detailed below: Purpose RM 000 To finance purchase of raw material (Note 1) 3,000 To finance increase in selling and distribution expenses: Retail 2,000 Thailand 850 Aviation 745 5

6 Total 6,595 Note 1 We have added another leather supplier, Italian Leather Group Spa which granted a shorter credit period of 60 days compared to 90 days for our existing suppliers, Zendaleather S.A. and Conceria Pasubio Spa. We estimate an average RM3.0 million value of purchases per month from this new supplier. In addition, the revised timeframe for the utilisation of the will allow PGB to prudently incur the cost or committed to the purchase of machineries or inventories based on the customer requirement and capacity study taking into consideration any new contract to be secured in the future. 4. DIRECTORS AND MAJOR SHAREHOLDERS INTEREST None of the Directors and/or major shareholders of PGB and/or persons connected with them have any interests, direct or indirect, in the abovementioned variation and extension of time for the utilisation of. 5. STATEMENT BY BOARD OF DIRECTORS The Board of PGB is of the opinion that the variation and extension of time for the utilisation of will not have any material effect on the financial performance of PGB and are in the best interest of the Company and shareholders. 6. APPROVALS REQUIRED The variation and extension of time for the utilisation of are not subject to any regulatory authorities or shareholders approval on the basis that the variation is not material given the proposed variation and extension of time remains consistent with PGB s existing business, and future plans and strategies as disclosed in the Prospectus. Nevertheless, the Board shall continue to be prudent in managing the and will continue to disclose the status of the utilisation of in its quarterly results and annual reports until its full utilisation. This announcement is dated 23 April