Extracted from Annual Report 2015
Dear Valued Shareholders,
On behalf of the Board of Directors, I am delighted to announce in this report that 2015 marks the end of our 4 year Corporate Turnaround Plan ("CTP"). The CTP which includes initiatives to rationalise the business model, strengthening the corporate structure and acquiring new business, sets the stage for Kumpulan Perangsang Selangor Berhad ("Perangsang Selangor"). Our performance in 2015 reflects the benefits of our consistent and successful strategies, which had enabled us to rescale and reposition our business in order to take advantage of opportunities for growth as the economic conditions improve.
The theme "Setting New Direction" is most apt for our 2015 Annual Report, as we focus on the next milestone in the course of redefining the way we invest in businesses with growth opportunities and drive for improved internal efficiencies as well as cost reduction.
For the financial year ended 31 December 2015, the Group recorded a marginal revenue reduction of RM2.6 million from RM87.7 million in 2014 to RM85.10 million from our continuing operations. This reduction was due to lower revenue recorded by hospitality sector and investment holding by RM7.1 million and RM3.0 million respectively in 2015. However, the reduction was mitigated by higher revenue of RM7.5 million contributed by trading sector.
Revenue contribution from the trading sector increased by 13.5%, from RM55.02 million in 2014 to RM62.47 million in 2015. The strong performance from this sector was due to higher sale of chemicals and equipment during the year. The 34% decrease in revenue of the hospitality sector compared to 2014 was attributed to closing down of our hotel operations in line with our rationalisation plan. Whereas, lower revenue from investment holding by 25% was due to lower management fees and rental income.
Our consolidated profit after tax and zakat reduced to RM58.94 million from RM117.65 million during the corresponding period, mainly attributable to lower share of profit from associated companies and recognition of loss on disposal arising from the completion of the disposal of Titisan Modal (M) Sdn Bhd ("TMSB").
For the financial year ended 31 December 2015, the results of TMSB's Group under the infrastructure and utilities sector have been classified under discontinued operations as the Company has completed the disposal of its entire equity interest in TMSB in December 2015
Perangsang Selangor's dividend payment to shareholders has been consistent over the years. The net dividend payment had been consistent between 2 sen to 4 sen per share, with exception in 2013 where special dividend was paid at 25.58 sen per share. We have rewarded shareholders with special dividend in appreciation of their continuous support to corporate exercises carried out by the Group.
The Board continues to maintain a conservative approach in allotting dividend payment, as we need to strike a balance between ensuring availability of sufficient fund to support continuous growth of our businesses and offering reasonable returns to our valued shareholders.
For financial year ended 31 December 2015, the Board recommends a final dividend of 2 sen per share, subject to shareholders' approval at the Annual General Meeting.
The key initiatives underpinning the strategies continue to progress as planned. With a dedicated new management line-up as the driving force, we have recorded sterling performance in the trading sector that saw an increase from an average growth of 11 % per annum between 2010 and 2014 to 13.5% in 2015. The infrastructure and utilities sector, which contributed to 30% of the total revenue in 2010, is irrefutably the main revenue earner contributing 70% to the total revenue in 2015.
Pursuant to the Selangor State Government's consolidation of the water services sector in Selangor, Kuala Lumpur and Putrajaya, the year marks a significant turning point in setting the new direction as Perangsang Selangor divested its investments in Konsortium ABASS Sdn Bhd ("ABASS") with the completion of the sale of TMSB, which owns 100% equity stake in ABASS.
The divestment has resolved Perangsang Selangor Group's financial obligations towards the repayment of the Group's borrowings, as exhibited in the significant reduction of the Group's borrowings from RM1.04 billion to RM30.13 million or a reduction in gearing ratio from 0.87 times to 0.02 times.
The joint development with a subsidiary of S P Setia Berhad for the re-development of Perangsang Templer Golf Club ("PTGC") into an environmentally friendly, eco-themed residential township is expected to contribute positively to the Group's performance upon its launch in 2016.
Our business is built on strong foundations and strategic growth plans are designed to set the Company up for continuing success into the years ahead. Amidst the tough economic backdrop, we will leverage on our solid fundamentals and resilient nature to deliver growth and enhance shareholders' values.
Our revenue from Aqua-Flo Sdn Bhd's ("Aqua-Flo") sale of chemicals for the portable water industries, including in East Malaysia have increased by 13.5% from RM55.02 million in previous year to RM62.47 million in 2015.
The steady growth in this sector was attributed to the increased demand for equipment used in water treatment plants and wastewater treatment sector provided by Aqua-Flo.
Aqua-Flo is involved in trading of chemicals and equipment, as well as providing technical services in water, waste and sewage treatment industries.Hospitality and Recreation Sector
As part of our hospitality and recreation sector rationalisation plan, we have ceased operation of the Brisdale International Hotel ("BIH") in April 2015 and PTGC in January 2015.
The above rationalisation has resulted in lower revenue generated by this sector from RM26.37 million in 2014 to RM13.75 million in 2015, representing 48% reduction in revenue.
However, we expect higher return from the hospitality and recreation sector from the proposed redevelopment of PTGC in Templer Park into an eco-themed township project, which is expected to take off in 2016.Oil and Gas Sector
Perangsang Selangor's wholly owned subsidiary Perangsang Oil and Gas Sdn Bhd that owns 40% of NGC Energy Sdn Bhd ("NGC Energy"), is well positioned to be a leading supplier of Liquefied Petroleum Gas ("LPG") under the "Mira" brand.
NGC Energy, a joint venture with Oman-based National Gas Company Societe Anonyme Omanaise General ("National Gas Co SAOG"), commands 25% of Malaysia's LPG market share for domestic, commercial as well as small and medium enterprise sectors. For the year, NGC Energy contributed RM1.67 million share of profit or 13% increase from 2014.Telecommunications Sector
Perangsang Telco Sdn Bhd remains optimistic in the telecommunication sector in view of the high demand of mobile telecommunications services. Perangsang Selangor, through Perangsang Telco Sdn Bhd holds 34.35% stake in Ceres Telecom Sdn Bhd ("Ceres").
Ceres had rolled out its strategic initiatives in 2015 in order for them to be competitive amongst the industry players. Ceres had shown positive results from the initiatives undertaken. Ceres contributed lower share of losses of 19% for the year to RM2.78 million from RM3.44 million in 2014.Infrastructure and Utility Sector
This sector has contributed a profit before tax and zakat of RM139.77 million in 2015, a 10% reduction as compared to 2014. This is mainly attributed to lower share of profit from Syarikat Pengeluar Air Selangor Holdings Berhad ("SPLASH"). SPLASH has contributed share of profits of RM103.85 million in 2015, recording a 31% decrease from RM151.60 million in 2014. The lower contribution was due to higher impairment loss on trade receivables and the impact of IC Interpretation 12 Service Concession Arrangements. Perangsang Selangor holds 30% equity stake in SPLASH.
Perangsang Selangor holds 20% equity stake in Sistem Penyuraian Trafik KL Barat Holdings Sdn Bhd ("SPRINT"), the highway operator for the 26.5km Kerinchi Link, Damansara Link and Penchala Link. For the year 2015, SPRINT contributed RM5.91 million share of profit as compared to RM2.05 million share of losses in 2014, as a result of toll rates hike in 2015.
Perangsang Selangor's commitment towards excellence is recognised locally and internationally. The Group's corporate social responsibility ("CSR") initiatives have gained international recognition in 2013 and 2015.
The Group's commitment towards providing comprehensive entrepreneurship training and initial seed funding to promote productivity and spur Selangor's economic growth received the coveted "Asia Responsible Entrepreneurship Awards 2015" under the "Social Empowerment 2015" category on 19 June 2015 in Macau. This is the second award received by Perangsang Selangor under the same category within a span of two years.
Perangsang Selangor's good governance to promote integration of sound risk management standards into business processes to enhance the overall growth and survival of an organisation won third place in the "2015 Risk Manager of The Year" category at the International Risk Management Conference 2015 held at Langkawi Resorts World. The award was presented by the Malaysian Association of Risk Management.
The outlook for the water services sector is expected to be positive with opportunities arising from the State Government's consolidation exercise to provide a holistic water services in Selangor, Kuala Lumpur and Putrajaya.
In the light of this opportunity, Perangsang Selangor, through a wholly owned subsidiary Nadi Biru Sdn Bhd ("Nadi Biru"), has ventured into the water pipe replacement business. Nadi Biru has acquired a 51% stake in Smartpipe Technology Sdn Bhd with an investment of RM5.1 million to offer integrated solutions to facilitate maintenance of water distribution systems.
Perangsang Selangor is continuously assessing business opportunities to further bolster its financial performance. We are actively engaging potential partners and positive on the outlook even with the current challenging business environment.
We work well in complex environments where we take a long-term view and integrate our operations with regulatory authorities to get the best result for all stakeholders. It is of the utmost importance to us that Perangsang Selangor is viewed as the preferred partner and builder of businesses as we emphasise on creating value in the companies that we invest.
We will continue to demonstrate adaptability and resilience as well as pursue opportunities that position Perangsang Selangor for sustainable growth and value creation. This is a company where emphasis is placed on building sustainable businesses in every sense and where decisions are not driven by short term considerations.
It has been a year of progress strategically, operationally and financially. There is, however no complacency as we continue to focus our efforts towards further improving the Company's overall performance that you expect and deserve.
In transforming our business and preparing for a future in a changing sector, we are indebted to our people. On behalf of the Board, I would like to thank all our employees and partners for their very considerable efforts in the past years. I look forward with confidence to your Company's response to further improvements in the year ahead.
To my fellow Directors, thank you for your undivided support, brilliant ideas, sound advice and solid commitment towards making the Group a key industry player in the state of Selangor.
YM RAJA DATO' HAJI IDRIS RAJA KAMARUDIN