About Us Chairman Statement
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 2009 ("FY 2009").
Performance
he global financial crisis since the second half of the calendar year 2008 has had a considerable adverse impact on the Group's performance during FY2009. The Group recorded a 19% lower turnover of RM1,650.9 million in FY2009 as compared to RM2,043.9 million achieved in the last financial year. Consequently, profit before tax ("PBT") for the continuing business declined by 51% to RM15.1 million as compared to RM31.2 million last year. After accounting for income tax, and losses attributable to the discontinuing business of RM25.5 million as explained below, the Group reported a loss after tax of RM16.8 million compared with a profit after tax ("PAT") of RM167.0 million last year.
The net loss attributable to shareholders, after minority interests, was RM6.7 million (2008: net profit of RM55.3 million). Consolidated net loss per share was 3.07 sen (2008: profit of 27.70 sen) while the consolidated net assets per share was RM1.51 as at the end of FY2009 (2008: RM1.75).
Review Of Operations
The financial crisis reduced demands in all sectors of the economy. The Group's operations in FY2009 were inescapably affected by the ensuing lower prices and rates of the Group's products and services, resulting in lower turnover and lower profit margins. This was evidenced in the Group's main contributors of turnover and profits, namely, the Agricultural and Industrial Chemicals division, the Polymer division and the Logistic division which all reported lower turnover and PBT in FY2009 as compared to the last financial year.
The financial crisis reduced demands in all sectors of the economy. The Group's operations in FY2009 were inescapably affected by the ensuing lower prices and rates of the Group's products and services, resulting in lower turnover and lower profit margins. This was evidenced in the Group's main contributors of turnover and profits, namely, the Agricultural and Industrial Chemicals division, the Polymer division and the Logistic division which all reported lower turnover and PBT in FY2009 as compared to the last financial year.
However, due to higher delivery of jobs in FY2009, the Engineering division recorded a higher turnover and a PBT as compared with a loss before tax in the last financial year.
The Media division reported higher turnover as compared to the last financial year as most of its units have just commenced operation in the previous financial year. However, the division recorded heavier losses due to the high start-up expenses and insufficient sales despite the higher turnover by some of its units. Due to the financial crisis, advertisers hold back their advertising spending during the financial year and this had an adverse impact on the results of the division.
As mentioned earlier, the Group incurred a charge of RM25.5 million in relation to a claim by the purchasers of the switchgear business for the shortfall in net asset value on the completion date as verified by a firm of independent auditors. The shortfall arose due to additional provisions of doubtful debts and obsolete inventories in the switchgear business taken over by the purchasers. This additional charge of RM25.5 million was shown as loss attributable to discontinuing business in FY2009. As a result, the total gain from the disposal of the switchgear business has been re-adjusted from RM147.7 million as reported last year to RM122.2 million.
Dividend
The Board of Directors has proposed a final dividend of 1.5 sen, less income tax, for the financial year ended 31 May 2009, subject to the approval of the Company's shareholders at the forthcoming annual general meeting to be held on 26 November 2009.
Major Corporate Development
As mentioned last year, Tamco Corporate Holdings Berhad ("Tamco"), a subsidiary listed on the MESDAQ Market (now known as ACE Market) of Bursa Malaysia Securities Berhad ("Bursa Securities"), has become an affected listed issuer pursuant to paragraph 2.1 of Guidance Note No 3 ("GN3") of the Bursa Securities Listing Requirements for MESDAQ Market. The securities of Tamco was suspended from trading on Bursa Securities subsequent to FY2009 pending the injection of a viable business. Tamco is currently evaluating new businesses for injection to further improve its financial performance and to uplift itself from being an affected issue under GN3. The suspension will be uplifted upon Tamco completing the regularisation plan as required by Bursa Securities.
The other major corporate developments of the Group in FY2009 are as reported in Note 46 "Significant Events During the Financial Year" of the financial statements.
Prospects For Next Financial Year
The Malaysian economy contracted at a slower rate of 3.9% in the second quarter of 2009 from 6.2% in the first quarter. As stated in Bank Negara Malaysia's Economic Report for Q2 of 2009, there are increasing signs that conditions in the global economy are stabilising as a result of the cumulative effects of extensive policy measures undertaken to stabilise the financial markets and to support the economy. There is also evidence that economic activity in the regional economies is picking up. Economic recovery, however, is likely to be slow as most advanced economies are still undergoing adjustments amidst on-going deleveraging activity in the private sector.
Going forward, the expectation remains that the domestic economy will improve in the second half of the year, to be supported by a recovery in domestic demand following improvements in labour market conditions, as well as business and consumer sentiments. The accelerated implementation of the fiscal measures, lower inflation, continued access to financing, and the accommodative monetary environment will provide further support to domestic demand. The stabilisation of the global economy is also expected to contribute to the improvement in the domestic economy in the second half of the year.
Looking ahead, the coming financial year will remain challenging for the Group. In facing these challenges, the Group will have to remain competitive. The Group will continue to focus on cost control measures and to increase productivity in order to improve profitability of its businesses.
Barring unforeseen circumstances, the Board expects the Group's performance for the next financial year to be satisfactory.
Board And Management
Dato Mohd Ismail Bin Che Rus, an Independent Non-Executive Director, resigned on 20 July 2009. The Board wishes to thank Dato Ismail for his contribution during his tenure with the Company.
Dato Mohammed Hussein joined the Board on 16 October 2009 as an Independent Non-Executive Director. Dato Mohammed has many years' of experience in the financial and banking sectors having served for 31 years in various management capacities in the Maybank group, the last being the Executive Director and Chief Financial Officer of Maybank prior to his retirement in 2008. The Board is confident that the Group would benefit from Dato Mohammed's knowledge, experience and expertise. Dato Mohammed has also been appointed a member of the Audit Committee and the Remuneration and Nomination Committee.
ppreciation
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
Petaling Jaya, Selangor Darul Ehsan
16 October 2009