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Extracted from Annual Report 2015


Dear Shareholder,
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.

Financial Performance

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 Group's turnover.

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 business.

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 KD PERANTAU.

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 prices.

Corporate Initiatives

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 inherent strengths.

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 and Energy.

Outlook

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 contributions.

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 investments.

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

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