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Chairman's Statement

On behalf of the Board of Directors of Knusford Berhad ("KB"), I am pleased to present the Annual Report and Audited Financial Statements of the Group for the Financial Year Ended ("FYE") 31 December 2019.

Overview of Financial Performance

In FYE2019, Knusford registered revenue of RM412.00 million, an increase of RM202.54 million as compared to RM209.46 million achieved in the previous financial year ended 31 December 2018 ("FYE2018"). Group revenue has increased due to higher construction work done recognised for DUKE and the River Of Life projects. Beside the construction sector, trading in building material sector has also contributed to the increase in revenue for the Group.

The Profit Before Tax ("PBT") for FYE2019 stood at RM17.75 million, a significant improvement as compared to the loss before tax of RM29.03 million reported in FYE2018. The dissatisfactory performance of the Group in FYE 2018 was mainly due to loss sustained by a construction project in Pengerang, Johor.

2019 was a challenging year for the construction and property development industries, upon which the Group substantially relies. Nonetheless, the Group has managed to overcome the prevalent obstacles and managed to deliver a commendable result.

Industry Overview and Prospects

Malaysia economic outlook in 2020 remains challenging going forward. Various occurrences such as the Covid-19 outbreak, crash in oil prices, US-China trade war and the consequential financial impact has caused a sharp slowdown in the global economy. Construction and property development activities are not exempted from feeling the heat.

The sharp fall in crude oil prices will reduce the government's revenue from oil-related sources. There may be less infrastructure spending in near future, as the government would need to balance the budget to mitigate the impact of lower oil revenue. New large-scale infrastructure projects may be deferred.

The political uncertainty coupled with the Covid-19 outbreak and sharp drop in the oil prices will certainly adversely affect all industry including the trading, construction and property sector leading to delay in awarding of new construction jobs and property launches. This impact would likely be apparent to KB as its trading of building materials sector substantially rely on the performance of the construction and property development sectors.

Moving Forward

Looking ahead, year 2020 definitely will be particularly challenging as an already uncertain economy is further negatively impacted by the ongoing Covid-19 pandemic. While our government's stimulus package is a welcome vibe, we are nevertheless preparing for a period of economic slowdown.

The current uncertainties will affect countries and companies alike. We acknowledged that under the current business environment it will be extremely difficult to achieve the same levels of results as year 2019. Nevertheless, we will continue to take all proactive measures to remain sustainable, resilient and focus in delivering and completing all our existing projects in hand within the budgeted cost and on agreed timeframe. We will be exploring, other potential business opportunities whilst managing and administering the company in a prudent, diligence and responsible manner.

For the current financial year 2020, KB will remain focus on its core business segments consisting of trading of building materials and rental of plant and machinery, civil construction and engineering works, property development, soft and hard landscape jobs.

The construction sector which garnered a revenue of RM310.15 million has been the major contributor in 2019. We are committed and will strive to maintain the performance of the construction sector which indirectly strengthened our performance in the trading of building materials sector.

The trading sector will still continue to be one of the main contributors to the Group's revenue alongside with other business sectors. The competition in market place has been compounded by the slowdown of mega projects in the country and fewer launches of property development projects. We will double all efforts to pursue supply and trading activities not only within Group's projects but also tapping external projects by being competitive in pricing and on-time-delivery.

Whilst the property development in 2019 was to be on stagnation and suspension with the sentiment of wait-and-see and difficulty faced by the purchasers to secure financing from the lending institutions, it is anticipated the trend will continue to 2020. KB will remain vigilant and will on partake when this sector has indicated improvement and stability.

KB realises the important of cash flow to be administered in dealing and funding its business activities, and have also embarked on a more stringent project financial management by placing greater emphasis on a prudent and responsible spending, effective costs and expenditure control to alleviate any form of leakage, wastage, oversight or even potential mismanagement.

The Group's low gearing should place us in good stead to secure new construction and other projects in the future. KB will continue to diligently pursue projects by exploring business opportunities independently or through strategic alliances with business partners and associates.

Corporate Governance

The Board recognises the importance of adopting sound 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.

Acknowledgment

On behalf of the Board, I would like to express my gratitude to all our valued customers, partners, regulators, bankers, business associates and shareholders, for their continuous support and confidence in the Group.

On behalf of the Board, I would also like to express my most sincere appreciation to Datuk Ahmad Zaki Bin Zahid and Mr Tan Teow Keat for their invaluable contribution to the Group during their tenure in office. In addition, I would like to take the opportunity to welcome Madam Lim Sew Hua who joined the Board on 29 January 2020.

Last but not least, I would like to extend my gratitude to the Directors for their undivided support and contribution, and my sincere appreciation to the Management and staff for their hard work and loyal dedication to the Group.

DYAM Tunku Ismail Ibni Sultan Ibrahim
Chairman