On behalf of the Board of Directors of Knusford Berhad ("KB"), I am pleased to present the Annual Report and Audited Financial Statements for the Group for the Financial Year Ended 31 December 2020 ("FYE 2020").
Overview of Financial Performance
In FYE 2020, the Group has recorded a revenue of RM325.93 million, a decrease of RM86.07 million from the accumulated revenue of RM412.00 million recorded in the preceding Financial Year Ended 2019 ("FYE 2019"). The Group's revenue has decreased mainly due to the lower construction work done recognised on its on-going projects due to the result of the various Movement Control Orders ("MCO") implemented by the Government of Malaysia since 18 March 2020. In addition, the suspension of work during MCO has resulted in supply chain disruption in the entire construction industry, which had also impacted our construction progress.
Consequently, the profit after tax reported for FYE 2020 of RM0.30 million, was also significantly lower in comparison to the profit after tax of RM16.71 million reported in FYE 2019. The lower profit after tax in FYE 2020 was partially due to higher share of loss recorded by its joint-venture entity and the lower profit margin for current on-going projects undertaken by the Group.
The year 2020 has been a challenging year for the construction and property industries with construction activities and property development across the nation having come to a standstill owing to the Covid-19 measures and new Standard Operating Procedures ("SOPs") imposed by the Government. Our trading division which depended on the activities in the construction industry, has also been affected by this Covid-19 pandemic. Nevertheless, we have taken every possible steps and measures to mitigate the adverse impact to the Group.
Industry Overview and Prospects
Economic outlook in 2021 remains uncertain. Together with the political instability and aggravated by Covid-19 pandemic, the resulting various movement control measures have, inevitably, impeded the overall economic activities and businesses including the construction, property development and trading activities that constitute the core business sectors of the Group.
The Malaysian Government has introduced and implemented various economic stimulus and financial assistance initiatives to boost consumer sentiments and inject liquidity into the market. The announcement of various stimulus packages and gradual resumption of economic activities are expected to gradually restore business and consumer confidence. The economic stabilisation and recovery process may take more than 1 year. At the moment, there is still great uncertainties in the market in view of the increasing labour shortage and the government's delay in launching large scale infrastructure projects.
Looking ahead in FYE 2021, The Group anticipates that business conditions will remain challenging, even with the economic recovery stimulus and financial aid initiatives which had been implemented by the Government. The road to economic recovery is expected to be in a slow but progressive manner.
In view of the current sluggish economic and business recovery it would be an uphill task to restore and place the Group in the similar financial position as in FYE 2019 for the FYE 2021. Nevertheless, the Group will continue to take all proactive measures in order to deliver and complete all on-goings projects in hand.
The Group will remain focus on its core business segments encompassing of trading of building and construction materials and machineries, civil construction and building works, property development and landscape works.
The Group's construction division has contributed a revenue of RM250.82 million, the largest revenue contributor in FYE 2020, and we will continue to improve this income stream by tendering and bidding for more construction and building projects. Any improvement in the construction division is also expected to strengthen the revenue for the Group's trading division. Our orderbook of RM428.51 million as at 31 December 2020 is expected to keep the Group busy for the following financial year whilst continuing with our immense efforts to secure new order books.
Trading division will also continue to be the second largest revenue generator for the Group. Though the market in trading industry is expected to be sluggish in coming year resulting from the constraints in construction and development activities due to Covid-19 SOPs, the Group will take all relevant measures and strategies to enhance our operational efficiency and optimise cost efficiency in order to maintain our performance in the coming financial year.
Despite the pandemic continuing to adversely affect the industry, we will stay focused with our key emphasis to improve project delivery and stringent project financial management in order to weather through the current challenging business environment.
The Group will continue to practise prudent spending and efficient management of its cashflow while leveraging on its experienced management team to pursue new projects and investment that match our business objectives. We will adopt a cautious approach to enhance our order book by exploring new business opportunities independently or through strategic alliances with business partners and associates.
The Board of Directors recognises the importance of maintaining good corporate governance and is committed to meet all applicable rules, regulations, norms and standards that will meet the expectations of the stakeholders.
On behalf of the Board, I would like to express my gratitude to all our valued customers, employees, bankes, business associates and partners and the shareholders for their continuous support and confidence in the Group.
DYAM Tunku Ismail Ibni Sultan Ibrahim
Date: 27 April 2021