About Us Chairman Statement
Dear Shareholders:
On behalf of the Board of Directors, I am pleased to present to you the Annual Report and Audited Financial Statements of the Group and of the Company for the financial year ended 31 May 2011 ("FY2011").
Performance
The Group posted a marginally lower turnover of RM1.507 billion in FY2011 as compared to RM1.513 billion achieved in the last financial year. Profit before tax ("PBT") declined to RM0.3 million as compared to RM34.6 million last year. The lower PBT was mainly due to the reduced profit margins in the Agricultural & Industrial Chemicals and Polymer businesses, a direct result of the intense competition in the regional markets arising from oversupply situation. The lower PBT was also due to the higher costs incurred in the Media division due to aggressive expansion.
The net loss attributable to shareholders, after minority interests, was RM12.95 million (2010: net profit of RM1.48 million). Consolidated net loss per share was 5.99 sen (2010: profit of 0.68 sen) while the consolidated net assets per share was RM1.41 as at the end of FY2011 (2010: RM1.48).
Review Of Operations
The uncertainties in the market place caused by the lingering financial crisis in the US and Europe affected all aspects of the economy including the Group's operations in FY2011. The ensuing lower prices and rates for the Group's products and services exerted pressures on the profit margins of the Group. This was evidenced in the Group's main contributors of turnover and profits, especially the Agricultural & Industrial Chemicals and Polymer divisions, which reported lower segmental profit of RM36.43 million (2010 : RM44.92 million) and RM11.71 million (2010 : RM16.65 million) respectively despite maintaining their respective revenue.
There was healthy growth in revenue in the Media division especially in the Out-of-Home sector as the division embarked on aggressive expansion programme to further grow the business. Revenue for the Media division grew from RM53.9 million last year to RM69.2 million in the current year. However, the division incurred higher segmental loss of RM16.0 million (2010 : RM9.7 million) due to the higher costs incurred for the acquisition of media rights to expand media sources. Such acquisitions are critical to the future success of the division as management seeks to grow the division into a respectable media group in Malaysia.
The Board takes cognizance of the losses incurred by the Media division. Efforts are being made to rationalize the operation to enhance revenue and save costs in the operations within the division. Barring unforeseen circumstances, the Board expects improved results in the Media division in the coming years.
The Logistics division posted improved results compared to last year. Its revenue grew to RM62.2 million from RM53.9 million last year while its segmental profit improved to RM8.9 million from RM6.6 million last year. Expansion of fleet size and better demand for storage facilities were the main reasons for the better results reported in FY2011.
The Group disposed of the substantially all the active companies in the Engineering division which were involved in trading of engineering products during the financial year. The disposal resulted in a loss of RM4.3 million to the Group mainly due to the realization of foreign exchange translation reserve. Other non-recurring costs incurred during the year include RM4.4 million impairment and fair value adjustments to the fixed assets and investments of the Group.
During the financial year, the finance costs of the Group amounted to RM12.9 million, which is slightly higher than RM10.5 million in the previous year. The finance costs were incurred primarily on trade facilities of the Group.
Major Corporate Development
During the financial year, the Group completed the Restructuring Scheme of Ancom Logistics Berhad ("ALB"), a subsidiary. This involved the disposal of the Company's logistics business to ALB. With the completion of this corporate exercise, ALB is no longer classified as an affected issuer under GN3 of the Listing Requirements of the Bursa Malaysia Securities Berhad for the ACE Market. Thereafter, ALB disposed its Engineering division which involved five subsidiaries involving in the trading and contracting of electrical engineering products during the financial year. The disposals were undertaken to enable ALB to focus on its new core business in logistics business.
The other major corporate developments of the Group in FY2011 are as reported in Note 40 ‘Significant Events During the Financial Year" of the audited financial statements.
Prospects For Next Financial Year
The outlook for global economy growth should be positive with the concerted efforts and commitments by governments to avoid another recession. Improvement in the economic activities of most emerging countries and recovery in the global supply chain would lend support to the worldwide growth. However, there remain constraints from the developed economies caused by their structural weakness. Further, prolonged uncertainties in the financial markets will continue to weigh down on real economic activity.
The domestic growth moderated to 4.0% in the second quarter of 2011 (1Q 2011: 4.9%) in line with the weaker growth worldwide. Manufacturing sector experienced a slowdown in activities. Nevertheless, the Malaysian Government believes that the overall growth of the country will continue to be underpinned by the sustained expansion of private domestic demand. This was further supported by the strong exports of commodities and resource-based products.
The coming financial year will be challenging. The Group will have to remain competitive by continuously seeking ways to enhance sales growth while at the same time, strengthening operational and productivity efficiency. Barring unforeseen circumstances, the Board expects the Group's performance for the next financial year to be satisfactory.
Board Changes
The Board wishes to place its gratitude to Dato Mohammed Hussein who tendered his resignation from the Board recently due to his other commitments. On behalf of the Board, I wish him all the best in his future undertakings.
Appreciation
The Board wishes to express its appreciation to the shareholders for their unwavering loyalty and support. The Board also wishes to thank its valued customers, suppliers, bankers, business associates and the regulatory authorities for their continued assistance and co-operation.
Last but not least, the Board wishes to express its heartfelt gratitude to the Management and staff of the Group for their continuous dedication and commitment.
Dato' Johari Razak
Non-Executive Chairman
13 October 2011
Petaling Jaya,
Selangor Darul Ehsan