On behalf of the Board of Directors of Knusford Berhad ("Board"), I am pleased to present the annual report and audited financial statements of the Company and the Group for the financial year ended ("FYE") 31 December 2015 ("FYE 2015").
Overview of Financial Performance
For the financial year ended 31 December 2015, the Group reported revenue of RM151.1 million representing a decrease of approximately 63.1% from the previous financial year's revenue of RM409.8 million. Correspondingly, the Group's profit before tax of RM5.0 million and profit after tax of RM1.6 million also decreased by approximately 88.7% and 94.2% respectively as compared to the profit before tax of RM44.0 million and profit after tax of RM27.9 million reported in the previous financial year.
The decrease in the Group's revenue and profitability for the FYE 2015 were mainly due to a considerable decrease in the sales volume for all divisions in the financial year, particularly the trading and services division, following the completion of major projects by our clients. In particular, our trading and services division reported revenue of RM145.6 million and profit before tax of RM 1.5 million, significantly lower than the previous year's revenue of RM331.0 million and profit before tax of RM41.5 million.
FYE 2015 has been a challenging year for the Group. Malaysia grappled with severe economic headwinds during the year, following unanticipated global commodity and currency shocks, financial market turbulence and reversal of capital flows. The implementation of the goods and services tax (GST), with effect from 1 April 2015, and the rationalisation of fuel and other subsidies had also adversely affected the consumption power of consumers. This had significantly contributed to the sluggish performance in the construction and property development sectors, the mainstays of the Group's business and financial performance.
The Group will continue to focus on its core areas of business in trading and services (Sales of building materials and construction equipment), civil construction and property development/investment.
The trading and services division is expected to continue to be a stable source of revenue and income for the Group, while providing some room for further growth. Steps are being taken to enhance the efficiency and cost-effectiveness of this division in the near future.
Our construction division is showing good signs of sustained progress. Besides our current projects in the Iskandar Development Region, our joint venture with Greenland Malaysia Urban Development Sdn Bhd in Greenland Knusford Sdn Bhd has started well with packages in hand while bidding for further projects in Malaysia and the region. In addition, the Group has begun to explore projects in the RAPID Pengerang area, while embarking on extending its construction expertise in areas such as landscaping and facilities management.
The property division continues to develop its land bank in Kajang Perdana while seeking out other attractive property development opportunities. Meanwhile, our property investments are showing better yields for the Group, although there is room to further grow returns and sharpen our property management capabilities.
Industry Overview and Prospects
Malaysia's Gross Domestic Product ("GDP") is forecast to continue its growth path in 2016, albeit at a slower pace than originally expected. In addition, the year is expected to remain challenging given the volatility in the global financial markets, fluctuating commodity prices and slowdown in China's economy.
While the property development market will be soft as a result of the challenging economic conditions, the construction sector is expected to be steady given the large infrastructure commitment from the Government, government-linked companies and others. This includes projects in the Iskandar Development Region and RAPID Pengerang areas, as well as in Greater Kuala Lumpur and other growth areas.
The Group will thus position itself to take advantage of the expected heavy expenditure in construction and construction-related activities this year and beyond.
As such, while the relatively weak outlook for property development and to a lesser extent construction sector is expected to prolong and remain challenging, the Board will continue to look for new business opportunities and bid for suitable projects in order for the Group to maintain satisfactory results and create shareholder value.
The Board is recommending, subject to the approval of shareholders at the forthcoming Annual General Meeting, a single tier dividend of 2% per ordinary share of RM1.00 each for the financial year ended 31 December 2015.
The Board recognises the importance of adopting good corporate governance and is committed to meeting all applicable rules, regulations, norms and standards to ensure that we meet the expectations of all stakeholders in this regard.
On behalf of the Board, I would like to express my gratitude to all of our valued customers, partners, regulators, bankers, business associates and of course shareholders, for their continuous support for and confidence in the Group.
would also to extend my gratitude to the Directors for their unstinting support and excellent contributions and to the management and staff for their hard work and loyal dedication for the Group.
DYAM Tunku Ismail Ibni Sultan Ibrahim