Chief Executive's Review
The mark of a resilient and strong company is one that not only thrives during good times,
more importantly, withstands the tide of challenges during tough times. This is all the more
pronounced when earnings are impacted and the environment is most certainly demanding. The
year 2015 was undoubtedly one of our toughest.
In spite of these overwhelming odds, we registered a satisfactory profit. This was possible, solely due to the
diversified nature of your Group, which enabled us to deliver on the bottom line.
Depressed economic conditions and exceptional circumstances that directly
impacted our various businesses weighed down on the Group's earnings.
We recorded a profit of RM269 million, a marked drop from the previous year's
profit. Given the market forces that affected us, a profit of a quarter of a
billion is indeed an achievement in its own right.
Profit after tax came in at RM139 million, on the back of a revenue of RM8.7
billion. A key contributor to the drop in revenue was the decline in fuel prices,
which impacted Boustead Petroleum Marketing Sdn Bhd significantly.
Additionally, the Plantation and Heavy Industries Divisions also impacted the
It is most certain that due to our foresight and planning, our stable of
investments mitigated the onslaught of poor earnings by some of the
companies within the Group.
We have not wavered in our commitment to our shareholders, and
by virtue of this fact, dividend yield for the Group came in at 4.7%, based on
the closing price for the financial year. Dividends for the year amounted to
20 sen per share.
This represented a total payout amounting to RM207 million,
reinforcing our position that Boustead is a strong dividend yielding stock,
especially during choppy economic times.
Our Property Division led the way in terms of profitability,
delivering a profit of RM139 million. This represents a reduction
compared with the previous year's contribution of RM295 million. The
previous year's results included the disposal of commercial land as well
as exceptional profit contribution from Boustead Ikano, which saw
substantial fair value gain on the Cochrane property
The Pharmaceutical Division recorded a profit of RM90 million
compared with RM100 million posted last year. Its performance
was impacted by reduced government orders as well as
amortisation for the Pharmacy Information System. The Division
was able to moderate these effects with growth in the non-concession
Our Plantation Division performed well with a profit of
RM95 million, a slight increase compared with its 2014 profit
contribution of RM90 million. The Division benefited from gains
on disposal of land totalling RM57 million, which worked to
compensate for the harsh effects of dampened crude palm oil prices.
The Heavy Industries Division recorded a deficit of RM137 million
compared with last year's profit of RM26 million. Its results were
impacted by a drop in revenue and the provision for liquidated
ascertained damages made for KD KASTURI under the service life
extension programme. Further to this, increased project costs as well
as provisions impacted our bottom line owing to the restoration of
Our Finance & Investment Division turned in a profit of RM44 million
compared with the previous year's RM110 million. This was a result of
the funding cost of investments and lower contribution from the
Affin Group, which was affected by the impairment of loans. The
adverse market conditions in the finance and banking sector had a
strong impact on our investment here.
The Trading & Industrial Division was able to achieve a profit of RM38
million, lower compared with last year's RM65 million. The Division
was affected by losses sustained by its tiles and paints manufacturing
segment. At Boustead Petroleum Marketing Sdn Bhd (BHPetrol),
profitability was sustained in the face of 2015's volatile crude oil
We were not deterred by the external and internal volatility
that had a direct impact on our businesses. Over the last 12 months,
we stayed true to our strategic business direction, focusing on
building value within our various investments and harnessing their
One such initiative was to draw on synergistic opportunities within the
Group. A good example was the co-branding promotion between
Affin Bank Berhad and BHPetrol, which resulted in the relaunch of
the AFFINBANK BHPetrol 'Touch and Fuel' MasterCard Contactless.
This was a smart way to expand the consumer market for both our
petroleum retail network and one of the business segments in our
Finance & Investment Division.
I am pleased to inform that we are always on the look out for
new opportunities in the market. One such prospect was our
50% acquisition of equity in Irat Properties Sdn Bhd. Not only did
this grow our property portfolio by allowing us to have a direct
stake in two prime properties, namely Chulan Tower and The
Royale Chulan Kuala Lumpur, it also enabled the Group with its
entrepreneurial spirit to venture into a new business.
We have taken a strategic stake in the Ministry of Transport's
automated enforcement system (AES), a project to enable Malaysians to drive more
responsibly and reduce road accidents and fatalities. Having conducted extensive due diligence
on the viability of this investment, we have completed integration
of the business we acquired, in order to ensure alignment and
better economies of scale for this business to perform.
In our Plantation Division, we completed the acquisition of 533
hectares (ha) of a prime mature oil palm plantation neighbouring
our estates in the Sugut region. This will complement our existing
core plantation land bank. We are ever conscious of the need
to optimise the value of our land bank. In mirroring this strategy,
we embarked on the disposal of 350 ha of non-core land bank,
primarily consisting of quarry land.
We have been steadfast in our position that non-performing
companies that dampen our profitability and balance sheet will
be dealt with. Reflective of this strategy, we are in the process of
disposing the property and assets of Johan Ceramics Berhad.
The Heavy Industries Division, particularly Boustead Heavy
Industries Corporation Berhad, is in the process of reorganising
its corporate structure. This is part of our restructuring and
rationalisation exercise to focus on its core businesses and
provide organisational clarity. The reorganisation is expected to
improve operational efficiencies, with its businesses now divided
into three distinctive segments of Defence & Security, Commercial
We are conscious that 2016 will bring with it, its fair share of
challenges and difficulties. If the first quarter of the year is anything
to go by, it will certainly be a volatile year. We are positive that
the inherent potential within our multitude of businesses will see us
through this stormy weather.
One of our first priorities is to strengthen our balance sheet.
We have proposed a rights issue, which is expected to net in over
RM1 billion. This will grant us stronger financial flexibility while
enhancing the liquidity of our stock and providing us with a sizable war
chest to seize opportunities for inorganic growth.
In addition to the proposed rights issue, we announced a proposed
bonus issue, which will allow us to reward our loyal shareholders
for their continuous support, providing the opportunity for
greater participation in the equity of your company. It must be noted
that the bonus issue by Boustead to its shareholders stands out from
most in the capital markets, since we are offering two new shares
for every five existing shares held. Again, this is another way for us
to continue delivering value to our shareholders.
Our Property Division remains a strong contributor to the Group's
profitability. We look forward to completing the disposal of our 30%
stake in Jendela Hikmat Sdn Bhd in the coming fiscal year. This will
allow us to realise a profit of RM198 million and recover RM119 million
in advances given to the company, enabling us to improve cash flow
and focus on our core businesses.
As for our Pharmaceutical Division, we aim to pursue our objective of
becoming an export hub within the ASEAN region. To realise this
goal, we will capitalise on our operations in Indonesia as we
build our name as an important manufacturer with a focus on
quality. We also look to expand our network of RoyalePharma
Pharmacy outlets in Malaysia to provide quality pharmacy services
for the community, as well as strengthening our partnerships
with independent pharmacies. Given the strong prospects for
the pharmaceutical sector, we are bullish that this Division will unlock
further potential for the Group.
In our Plantation Division, we expect to see the conclusion of
the disposal of our non-core land bank, which will net us a profit in
the region of RM120 million. At the same time, we are actively
seeking viable land bank to grow our portfolio. From an operational
perspective, we will heighten our efforts to improve productivity,
which should result in better production yield.
Our Finance & Investment Division is expected to see tough conditions
in the year ahead. However, given its nimble nature, we will be better
prepared to seize opportunities within this sector. We expect the
AES to be rolled out successfully in the coming year with the
implementation of new cameras in critical areas that are prone to
accidents. These sites that are known as black spots and are identified by the
Ministry of Transport and its agency, the Malaysian
Institute of Road Safety Research, will allow us
to plant up new cameras. Its core objectives are
to reduce accidents and fatalities and generate
new revenue for us. Other key investments in our
portfolio, including the Affin Group and Boustead
Travel Services, are expected to maintain their
The year 2016 will see an extension of external
pressures affecting the performance of our
Trading & Industrial Division. Nevertheless, we are
encouraged by the fact that the businesses that the
Division is involved in are imperative to the nation's
economy. Meanwhile, the proposed disposal of the
property and assets of Johan Ceramics Berhad is
expected to be completed in the first half of 2016,
for a cash consideration of RM28 million.
In the Heavy Industries Division, in line with the
restructuring and rationalisation exercise, three
chemical tankers were disposed for USD5.7 million
each. The disposal is expected to be completed
in March 2016. The development of the Littoral
Combat Ship project is also progressing well and
we are pleased that the basic design process is at
its final stages.
The following pages offer a detailed elaboration on how
our Divisions have performed, coupled with our corporate
responsibility efforts during the year.
In the face of adversity, we will not falter. I am encouraged
by the fact that we have a diverse and talented pool of
leaders and professionals who will most certainly give
their utmost to deliver results
We will work harder at improving efficiencies, building
on organic growth and unlocking opportunities for new
I urge our shareholders to remain steadfast with us, as
we offer you our firm commitment to delivering value for
your investment in the Boustead Group.
TAN SRI DATO' SERI LODIN WOK KAMARUDDIN
Deputy Chairman/Group Managing Director
1 March 2016
Back to Top